Factors Constituting the Real Estate Market and Classification of Real Estate Market

+ Concept 2: The real estate market is the "place" where buying, selling, transferring, leasing, mortgaging and related services such as brokerage, consulting... take place between entities in the market, where the State's management role in the real estate market has a decisive impact on promoting development or inhibiting business activities in the real estate market.

+ Concept 3: The real estate market is the organization of rights related to real estate so that they can be exchanged for value between individuals or market participants. These rights are independent of the physical characteristics of the real estate. This concept leans towards real estate as a model, an organization so that rights related to land can be exercised independently.

The concepts presented above all have a general point in common about the real estate market. That is, the totality of real estate transaction relationships (transaction relationships between buyers and sellers, between supply and demand of real estate) is carried out through monetary relations. The real estate market was born and developed when land became a commodity. That is due to the inevitable increase in land use demand and the development of economic and social activities.

The real estate market can be understood in a broad and narrow sense:

+ In a broad sense, the real estate market includes relationships in real estate creation industries, market support institutions, and activities directly related to real estate transactions.

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+ In a narrow sense, the real estate market only includes activities directly related to real estate transactions.

The current popular concept of the real estate market is understood in a narrow sense, or generally called the real estate market. In reality, in the real estate market, the real estate market is the most clearly formed and operates most actively. The real estate market is understood as the "place" where the buying and selling of goods, land use rights, construction works as well as services associated with those goods take place.

When analyzing and evaluating the real estate market, we usually focus on three basic areas of this market:

+ Property ownership, market information, contracts and contract enforcement.

+ Real estate finance that stands out is not only finance, but also the financial legal mechanism related to real estate investment, using real estate as collateral, increasing secured transactions, insurance mechanism and risk management.

+ Market structure: including the public or private role in developing, creating real estate and real estate market operations.

Real estate is different from other commodities in that it is not only bought and sold, but also the subject of many other transactions such as leasing, mortgage, and transfer of usage rights. Real estate business is the activity of organizations and individuals in the real estate market for the purpose of making a profit. These activities can be investment, leasing, management, transfer of real estate... and accompanying services such as brokerage, consulting, real estate appraisal... However, all of the above transactions are also affected by the laws of value, the laws of supply and demand, the laws of competition... like other ordinary commodities.

1.2.3. Factors constituting the real estate market and classification of the real estate market

+ Factors constituting the real estate market:

The real estate market is formed on the basis of a synthesis of many factors, including

including:

- Real estate goods: land, construction works on land...

- Forces participating in the real estate market: buyers, sellers, managers,

intermediary, tenant, lessor…

- Infrastructure of the real estate market: where exchange activities take place, means of supporting exchange, buying, selling, trading, means of information, legal basis...

- Market operating mechanism: State management and regulation of market rules.

+ Real estate market classification:

There are many ways to classify the real estate market, generally only relative. The classification of the real estate market depends on the research purpose of each topic. Here in his thesis topic, the author has consulted additional documents from the Vietnam Construction Association, CIEM and some Vietnamese forums.

about real estate and real estate market to classify real estate market according to the following bases:

- Based on the physical form of the object of exchange:

In the real estate market, the object of exchange is real estate, including ownership of constructions attached to land and conditional land use rights. This market can be divided into the market for real estate of means of production and the market for real estate of means of consumption. In which:

 The market for production materials real estate includes: land market (urban and rural residential land; agricultural land, forestry land, land in export processing zones, industrial park land, etc.), industrial factory premises real estate market, etc.

 The consumer real estate market includes: residential real estate, commercial real estate, offices, retail stores, etc.

 It is both a market for real estate of production materials and a market for real estate of consumer goods such as roads, bridges, etc.

- Based on the area with real estate:

 Urban areas: urban land market, urban housing market, industrial factory real estate market, commercial real estate market, public real estate market...

 Rural areas: rural residential land market, agricultural land market, forestry land market, rural housing market, non-agricultural land market (land for building headquarters, offices, shops, etc.), agricultural production factory real estate market, public real estate market, etc.

 Bordering areas: residential land market, housing market, agricultural land market, industrial factory real estate market, agricultural production, public real estate market...

- Based on the use of real estate:

 Land market (agricultural land and non-agricultural land).

 Commercial construction market (headquarters, offices, hotels, shopping centers, stores...) and public construction (transportation, irrigation, healthcare, culture...).

 Industrial construction market (factories, production premises, industrial parks, export processing zones...).

 Housing market (urban and rural).

 The special construction market has real estate products which are intangible real estates considered as exploitable resources (tourism business...) such as cultural heritage, historical relics...

- Based on activities in the real estate market (business nature):

 Real estate buying and selling market.

 Land use rights auction market.

 Real estate rental market.

 Mortgage and real estate insurance market.

 Real estate service market, including: real estate brokerage services, real estate consulting, real estate information, real estate valuation, real estate maintenance...

- Based on the order of time the real estate enters the market:

 Level 1 market: market for transferring, assigning or leasing land use rights (also known as primary market).

 Secondary market: market for construction of buildings for sale or lease.

 Tertiary market: the market for selling or leasing back properties that have been purchased or leased.

In addition, the real estate market can also be classified according to:

- Transaction method:

 Concentrated real estate market (organized into real estate transaction centers).

 Real estate market is not concentrated.

- Law on transaction procedures:

 Public real estate market.

 Underground real estate market.

Real estate

- Real estate market operations:

 Market for land use rights and natural resources.

 Primary market and secondary market.

 Construction investment market forms new real estate.

 Market for buying and selling assets attached to land and market support services

For the Vietnamese real estate market, we can assume that it includes the market

primary real estate market and secondary real estate market. The primary market is formed when the State allocates or leases land. The subjects participating in this market are the State (representing the owner) and those who have a need for land. After receiving the land use right, the land user invests in construction to form real estate. Then, the land user (the person who creates and builds the real estate) conducts transactions on real estate goods such as buying, selling, transferring, leasing, mortgaging, insuring, etc. These activities are carried out in the secondary real estate market.

1.2.4. Characteristics of the real estate market

+ The real estate market is subject to more intervention from the State, especially in business activities and planning work in establishing rights and protecting property ownership rights of citizens and organizations in the process of exchanging real estate goods. Real estate transactions and business always require transparency and publicity. And because ownership and use rights of real estate are separated, when buying, selling, and transferring real estate, contracts and certificates are always attached. Buying, selling, and transferring real estate always have real estate transaction fees such as registration tax, management fee, value added tax (VAT), transfer tax, notary fee, interest fee, commission fee for brokers, information, etc. According to practice, the total reasonable real estate transaction fee accounts for about 6-8% of the real estate purchase and transfer price. The valuation of the framework of total transaction costs, services and taxes is carried out by the State's functional agencies.

+ Speculative factors in the real estate market always exist and when there is an opportunity, the "development balance of the debt triangle" (banks - residents - real estate investors) is broken.

+ When buying and selling real estate, people who need to use real estate need to have careful calculations and need highly accurate information. Because real estate is a valuable commodity, the price of real estate is affected by many factors. On the other hand, information on the real estate market is very complicated and sometimes inaccurate (fake information released by real estate traders to stimulate demand for real estate...). Therefore, the role of real estate consultants, appraisers, and brokers belonging to professional brokerage organizations operating in the market is necessary. That inevitably leads to the development of real estate service business.

+ The development of the real estate market will create favorable conditions not only for individuals and organizations doing real estate business, but also create conditions for the organization of using real estate goods in the activities of domestic and foreign economic organizations (production and business activities, service provision of units...) effectively, maximizing profits, bringing benefits to the whole society.

+ Fluctuations in the real estate market, which in many cases are difficult to predict, are the result of the impact of many factors. Therefore, the real estate market is governed by other markets, especially the financial market. A country's real estate market can only develop healthily and stably when there is a sustainably developed capital market. The reason is that: a large amount of capital mobilized in the financial market is invested in the real estate market, and because real estate products have the characteristics of being immovable, durable and of great value, they are often used as collateral in borrowing activities in the capital market. Thus, if real estate prices fall too quickly, the result is an increase in bad debts, which can in some cases lead to the bankruptcy of some financial institutions in the capital market.

+ In the real estate market, the supply-demand structure is very diverse. The basic forces participating in this market are buyers and sellers. In addition, due to the special nature of real estate goods, individuals and organizations can participate in the market as lessors, tenants, mortgagors, mortgagees, inheritors, heirs, etc. For each specific subject, the State applies a specific and separate policy framework. Therefore, the real estate market is easily divided in terms of society, geography, and structure. The real estate market is not centralized.

The real estate market is not only concentrated in the central area but also spread across all regions and areas of the country. Each region and area has an uneven level of development and population density. Therefore, the demand for real estate is also different in each region and area, leading to differences in the scale and level of development of the real estate market. The reality of the Vietnamese real estate market shows that in urban areas, the real estate market has a higher scale and level of development than in rural areas. Urban areas are the cultural - economic - political centers of the whole country or of a region, but have a higher demand for real estate, although prices are more expensive than in other urban areas. Moreover, within a city, the real estate market in commercial centers or important traffic junctions is more vibrant than in other areas. If there is a lack of synchronous coordination in terms of policy, it will create isolation that reduces the effectiveness of this market.

+ The real estate market is very sensitive to economic growth, easily "heated" when the economy has high growth and easily "frozen" when the economy is in recession.

+ The real estate market is also very sensitive politically, culturally and socially. On the one hand, factors such as political fluctuations, social environment, customs, community conventions, etc. all have an impact on buying and selling behavior in the market. On the other hand, poor market organization can be a factor that deepens the gap between rich and poor, disrupts community culture, divides society and creates social discontent.

+ The real estate market, once not organized, not fully informed, and in unstable macro conditions, will be strongly influenced by psychological factors, especially for countries that have never experienced a market economy and have a low level of education.

In general, the real estate market changes in accordance with the operating trend of a product: initiation - growth - saturation - decline. The level of change of these 4 stages, fast or slow, complicated or not, depends on the specific conditions and circumstances of the socio-economic situation of each period.

1.2.5. Group of factors affecting the real estate market

+ Group of natural factors: terrain, soil, geographical location and exploitation conditions. If these factors are favorable, the amount of land that can participate in the real estate market increases and vice versa.

+ Group of political factors: the political regime and institutions of a country will determine what types of real estate are considered commodities and are allowed to be traded on the market.

+ Group of economic factors: the level of economic development will affect the scale and development level of the real estate market.

1.3. The role of real estate business in the national economy

1.3.1. Increase land value and promote production development

The real estate market was born when real estate became a commodity. The real estate market contributes to creating conditions for the effective allocation and use of limited and increasingly scarce land funds. Currently, the number of construction projects is increasing. This enriches the forms of real estate assets and increases the value of the land where the construction works are located. At the same time, the development of real estate projects will lead to a series of demands for supplies, construction materials, machinery, equipment, construction technology, information, furniture, etc. When developing real estate projects, the manufacturing industries that supply the above items will also develop.

The real estate market creates incentives for investment in real estate such as land, factories, etc. and thereby affects economic growth.

1.3.2. Mobilizing capital and resources for the economy

The development of real estate is the increase of fixed assets in society and is an important source of investment capital for development in the national economy. Real estate business development often brings large profits (because real estate is a valuable commodity), attracting domestic and foreign investment capital. When business activities in the real estate market develop, the speed of capital circulation is faster, which is a way to supplement capital for investment development. In addition, the development of the real estate market will directly affect the development of the financial market. The transformation of real estate goods into financial assets contributes to mobilizing resources for the economy.