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Alan Phan, a famous Overseas Vietnamese fund manager, has answered criticism over his opinions that the Vietnamese real estate market should be left to fall.
Dr. Alan Phan argued it would be preferable if housing prices fell by an additional 30%-50%
In late March, Alan Phan, chairman of the Hong Kong-based private-equity fund Viasa, told VnExpress that the move would pull down housing prices by an additional 30% to 50%. This would mean they matched people’s incomes and facilitate more medium-income people to buy houses.
He estimated that when the real estate market fell, bad debts in the banking system would sharply increase and a lot of banks would go bankrupt as the country now has too many banks.
“It doesn't matter if a half of current banks are bankrupted when the government takes measures to prevent people from financial risks. A bank crisis would result in a tumble in the stock market but investor confidence would be revived then and a new stage of economy would start,” he emphasised.
He said that the government’s plan to give VND30 trillion (USD1.43 billion) in refinancing to several banks to lend out at a preferential interest rate of 6% for three years to house buyers is unfeasible This is because the funding might just “stop the bleeding, but will not heal the injury”.
“The market should be left to regulate itself, and it will bounce back in four or five years,” he said.
Phan’s views have stirred public concern and been seriously criticised by real estate investors and organisations.
Hanoi Real Estate Club, which encompasses 1,000 members across Vietnam, has sent 15 questions concerning their viewpoints and analysis on the Vietnamese real estate market to Phan.
They said that the current too high housing prices in Vietnam were a result of high land prices and high imported prices of high-end materials and equipment for the construction, in addition to “lubricant” funds to facilitate project implementation.
The club questioned Phan how to deal with serious consequences to the economy, production and trading sectors and the people when the real estate market is left to fall.
They required Phan to clarify which basis he has used to calculate real estate prices in Vietnam and how the market could rebound in just four to five years.
They questioned Phan’s experience in the Vietnamese real estate market despite his 43-year experience in the US and Chinese real estate markets.
In response, on March 31, Phan sent a letter answering the club’s questions and proposed ending the debate.
However, most of his answers were said to be too general.
“When you blame sky-high real estate prices on too high land use fees, imported prices and lubricant fees, it has indicated the inefficiency of your investment as well as weak and unprofessional management,” Dr. Phan commented.
He continued to defend his idea to let the market to fall by saying that it doesn't matter when the real estate market falls and that real estate sector already has far too much importance in terms of the overall economy anyway.
“Currently, the real estate sector doesn't contribute anything to the country’s productivity while it consumes considerable resources,” he emphasised.
Government intervention needed
Government spokespersons claimed the real estate market affected the whole economy
Deputy Minister of Construction Nguyen Tran Nam said the real estate market still needed the government’s support and intervention in order to return to its trajectory.
“After an eight-year period of development, the real estate sector has contributed over 10% to the country’s GDP, proving its importance in the national economy,” Nam noted.
Nguyen Khai Hoan, Chairman of Khai Hoan Land, called for tighter control over groundless sources of information so as to prevent negative impacts on the market development.
“I’ve seen some controversial saying about the real estate market recently. I do think that it’s impossible to leave the market to fall as it would result in serious consequences in the economy. Speakers should be held accountable for their opinions. Real estate is an important sector in the national economy, so it would affect several other sectors,” Hoan emphasised.
Dr Le Dang Doanh agreed, saying that amid huge real estate-related bad debts and oversupply in the market, saving the market is an indispensable issue.
“The real estate sector has relation to several other industries such as material industry, construction and hundreds of other industries in the economy. Helping the real estate market is to save the economy,” Doanh noted.
Economists Dinh The Hien recommended that all parties that take part in the real estate market should maintain a more unruffled attitude instead of thinking that the current depression would never end.
“It’s subjective to say that the real estate market would not further develop or it takes five to seven years for the market to rebound,” he added.