The National Assembly’s Economic Committee in Vietnam recently revealed that it would not offer any further assistance to the country’s property market, reported Vietnam Net Bridge.
“It is wrong for enterprises to think that the government will rescue them. With such high rates of bad debts, we can’t rescue the real estate sector even if we wanted to,” said Nguyen Van Giau, committee chairman.
Further government action might encourage reckless business, according to Vietnam Net Bridge.
The real estate sector made up 19.25 percent of all banking bad debts as of September 2012, according to statistics published by the State Bank of Vietnam. This generated difficulties for Vietnam’s construction sectors according to a report released last week by the Committee.
The construction sector in Vietnam currently employs 3.3 million people, approximately 6.4 percent of the country’s total workforce. The construction material sector also provides jobs for over 500,000 people.
Real estate firms in Vietnam have reported increased debts due to interest on their loans, and the country’s banking system is also threatened by tightened liquidity.
The mismatch between supply and demand is one of the major difficulties facing Vietnam’s property market, according to last week’s report. In recent years investors have focused on high end housing whilst the majority of demand is from lower incoming groups.
“Vietnam’s property prices are considered high compared to other countries while our per capita income is low,” stated the report.
Property firms have also placed too many expectations on the real estate market, according to Vietnam Net Bridge, who reported that widespread speculation led people to develop a false belief that property prices would rise.
Property prices in Vietnam have risen up to 25 times more than average incomes over the past two decades, according to Vietnam Net Bridge. In European countries property prices have risen only seven times higher than average annual incomes, 6.2 times higher in Thailand and 5.2 times higher in Singapore.
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