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A recent conference suggested trends have proven to keep investors focused on upper-scale real estate projects for high-income earners rather than the economical housing segment.

Real estate is among the most attractive sectors to foreign investors in Vietnam.

The information was reported at an international real estate conference entitled “Housing and Real Estate Market Development-Worldwide Experience and Options for Vietnam” held in Hanoi November 26-28.

According to the Central Steering Committee for Housing and Real Estate Market Policy, just one third of the total number of social housing projects in Vietnam have begun construction, proving to be unattractive to investors.

Many property firms said they would make limited profits from housing projects for low-income earners because prices of apartments for them are stipulated by the state, while prices of construction materials are sharply increasing. Additionally, it is difficult for them to get loans from banks. Currently, only the Vietnam Development Bank is providing loans totaling VND7 trillion (USDD350 million) for social housing projects.

Experts at the conference said capital for property in Vietnam mostly come from foreign investments and people’s capital, not a specialised source. Therefore, the local market still depends on credit and monetary policies.

In the fourth quarter of 2009, a number of real estate segments saw slight changes due to lack of credit support from banks. In the third quarter of this year, the local proper market faced a standstill of transactions when banks tightened loans. This is among major causes of unstable real estate market development.

Minister of Construction, Nguyen Hong Quan, said that problems such as escalating housing and land prices against people’s income, weaknesses in site clearance and resettlement policies and undeveloped infrastructure systems connecting urban areas also have bad impacts on the Vietnamese property market.

At the gathering, Professor Stephen Mak Wing-Kai from Hong Kong Polytechnic University pointed out that preferential policies for real estate development in Hong Kong where local banks offered mortgage loans for real estate projects. With a small area of just 1,104 km2, the Hong Kong government has applied long-term housing policies for people. In 2009, 3.3 million people in Hong Kong, or 47.1% of the local population, lived in public housing, 29% lived in hired apartments and 18.1% in subsidised houses.

Dr. Habibullah Khan, Consultant of the World Bank, said thanks to the government’s policies, up to 82% of the Singaporean population lives in public houses and 90% own houses.

In 1960, Singapore set up the Housing Development Board to focus on building houses for low-income earners. The government also paid attention to control the realty bubble.

Meanwhile, the Japanese government concentrates on encouraging the private sector to invest in urban and infrastructure development through offering low interest or free interest loans for them.