According to a group of authors from the National Economics University, in the context of the world economy's difficulties and uncertainties, Vietnam's economy in 2022 has achieved outstanding growth after Covid-19, inflation, and macroeconomics tissue is stable. However, some problems in the economy still exist, especially the soundness of the monetary and financial system has not been improved. The real estate sector, which has many risks of instability and has not been developed sustainably, is one of the bottlenecks that is directly tied to the financial and monetary system. 

Before releasing the report, Prof. To Trung Thanh, co-editor of the publication, Head of the Department of Scientific Management, National Economics University, shared the research team's view on the most urgent solutions for the recovery of the real estate market.

Specifically, the research team recommends three groups of solutions to stabilize and develop the real estate market, including:
- (1) Perfecting the legal system; 
- (2) Adjusting supply-demand and increasing information transparency
- (3) Opening up capital for the real estate market.

Mr. To Trung Thanh, in particular, stated that opening up the capital is currently the most important: 'Like a sick person, they need to be refueled first. And long-term institutional and legal solutions are required for sustainable development. Furthermore, it is to solve the story of balancing supply and demand'.

Also read: Domestic real estate market needs credit solutions: experts » Breaking News, Latest World News Updates - VietReader Viet Nam

Commenting on the impact of lowering interest rates on the real estate market, Mr. To Trung Thanh said that although the State Bank (SBV) had some rate reductions in the first quarter, however, the target of this interest rate reduction is not to serve the real estate market, the essence of this interest rate reduction is to support the economy in general, when high-interest rates in the past have affected access to capital of all businesses, so it is not advisable to expect too much that a reduction in interest rates will help real estate businesses have more capital. 

According to this expert, real estate enterprises can raise a substantial amount of cash via the bond market in 2021. However, by 2022, the bond market has declined dramatically, forcing new businesses to rely on credit. 

In 2022, credit inflows into real estate increased sharply. According to the State Bank, real estate credit outstanding is 2.58 million billion dongs, equivalent to 21% of credit balance, comparable to about 26.3% of GDP. Specifically, the credit capital flow from the commercial banking system (commercial banks) into the real estate sector in 2022 has increased by about 24% compared to 2021; 1.7 - 1.6 times higher than the average credit growth of the whole system of 14.17% in 2022 and the real estate credit growth in 2021 and 2020 ( 15.37% and 12.06% respectively).

Statistics show that credit from commercial banks poured into the real estate sector amounted to 1.7 million billion dongs in the form of loans for living needs. In particular, credit capital tends to increase in speculative segments such as land use rights and housing segments. Credit for housing and self-use increased by over 30%. In the credit structure of the real estate sector, over 60% is credit for housing needs and self-use, worth mentioning here is mainly the high-value segment (buying houses and high-end apartments of high-end projects) and unfinished real estate projects). This is an attractive segment for speculative capital flows and mostly virtual demand. 

According to the report, the real estate market still depends on bank credit, and the proportion of real estate credit in the speculative segment is not small. 

Depending on credit capital is not a sustainable development direction for real estate, as it can create cross risks to the stability and safety of the commercial banking system if the market situation worsens and simultaneously worsens the situation supply and demand mismatch in the real estate market. Speculative products are often of great value and use high leverage with a high-profit target. As borrowing rates increase and leverage reduces, such markets and products frequently freeze. 

As a result, according to Mr. Thanh, if we are not careful in supporting the real estate market with credit, we may unwittingly promote the speculative sector. If you want to support credit for real estate, you need to be very careful, limit too much credit focus on real estate projects, and high-class housing; focus credit capital to invest in social housing projects, low-cost commercial housing projects with high efficiency, supporting people with real housing needs, through which the market can develop sustainably.

Also read: $5 billion credit package authorised for the real estate sector » Breaking News, Latest World News Updates - VietReader Viet Nam

With the pressure that the State Bank is facing in policy management when the global context is unstable, Mr. To Trung Thanh said that the real estate market is very difficult to rely on credit capital right now.

"The opening of capital flows must focus on the bond market, but the key is to create confidence in the market," - Mr. To Trung Thanh affirmed.

From 2019 to 2021, the corporate bond market in Vietnam thrives. This is considered a sustainable long-term capital mobilization channel for the real estate market, minimizing risks when depending on short-term loans in the money market.

However, by 2022, Vietnam's bond market will face many difficulties, especially after the violation of Tan Hoang Minh and Van Thinh Phat Group. When the number of new issuances fell, investors sold off significantly before maturity, and the volume of buying bonds before maturity was great, the corporate bond market faced various risks. With the decline of the corporate bond market, real estate businesses are in a difficult position.

In 2022, the corporate bond market was quiet with the total issuance value decreasing by 64%, reaching only VND 269,733 billion. The real estate group recorded a decrease of 79%, reaching only VND 62,310 billion, accounting for 23% of the total issuance value of corporate bonds.

The market plunged in many speculative segments, reflecting signs that real estate developers have used the private bond issuance channel as a tool to reverse real estate debt at commercial banks. According to the study, while the corporate bond market was frozen, many real estate developers were unable to not only service their debts but also obtain extra funds to maintain their production and business activities.

The expert group made the assessment report that the real estate corporate bond market currently has the following problems: 
 -(1) Weak market transparency; 
 -(2) The right of a group of non-financial enterprises (including real estate development enterprises) to establish, buy, sell, or merge (M&A) a securities company (SSC), a financial company that has created significant conflicts of interest in the financial system; 
 -(3) The legal framework lacks supervision of the publicization of privately issued corporate bonds on the secondary market.

To help alleviate these bottlenecks, the government has lately released a slew of new decrees. However, GS. Dr. To Trung Thanh stated that more actions are required to create market transparency, especially to review institutional inadequacies. 

The report has recommended many solutions related to opening the corporate bond market. The first is to review the financial status of corporate bond issuers currently facing difficulties; based on which identify bond issuers (mainly real estate developers) that can support them.

The second is to strengthen the monitoring and supervision of cases of enterprises and groups of enterprises that issue large volumes of corporate bonds. Third, the SBV needs to propose measures to monitor and prevent direct capital movement between commercial banks or indirectly through securities companies, fund management companies, etc., to purchase individual corporate bonds issued by the public-related companies of the issuing bank's shareholders. 

Fourth, it is necessary to study and amend regulations on the capital adequacy of commercial banks and insurance companies in the direction of applying risk coefficients to corporate bonds whose issuers do not have a higher credit rating than rated corporate bonds. Finally, according to the research team, it is necessary to encourage the development of institutional investors in the real estate market, by promoting the development of real estate investment funds.

Also read: 
- Vietnam’s real estate market at turning point in 2023: Experts (hanoitimes.vn) 
- Vietnam Corporate bonds "break the ice": Real estate group accounted for more than 98% » Breaking News, Latest World News Updates - VietReader Viet Nam