Real Estate Market Lacks Professionalism and Complicated Procedures

The State has the task of allocating and leasing land on behalf of the State. In addition, there is the situation of land being leased arbitrarily, for the wrong purpose, benefiting from public land funds, and wasting this socialist asset.

2.3.1.2. Real estate market lacks professionalism and complicated procedures

Vietnam's real estate market has many positive developments. In 2007, FDI capital registered for investment in real estate alone was over 8.5 billion USD, accounting for over 42% of the total registered capital (20.3 billion USD). In the first 5 months of 2008 alone, FDI in this sector reached 14.7 billion USD. Many localities' budget revenue from real estate accounts for up to 50% of total revenue. The whole country is implementing over 1,500 housing and new urban area projects, adding 37 million square meters of urban housing each year ( Source: Foreign Investment Agency, Ministry of Planning and Investment, updated to May 26, 2008 ). However, the market shows many shortcomings. The market lacks medium and small-sized goods, and lacks rental housing suitable for the majority of middle and low-income earners. Many large companies and corporations invest in the real estate sector, most banks establish funds or real estate trading companies, creating internal investments that are difficult to control.

The procedures for preparing an investment project in Vietnam must go through 34 stages, lasting 2-3 years, while in Thailand it only takes 5 months. According to the draft Law on Real Estate Registration, the responsible agencies include: Ministry of Justice, Ministry of Natural Resources and Environment, Ministry of Construction, People's Committees of provinces and centrally run cities. There are many subjects, agencies, and managers like that, but the information and information provision regime is very weak. Currently, no State agency provides reliable statistics on real estate prices and transaction volumes.

On the other hand, the reality is that organizations and individuals who want to find information about real estate all encounter difficulties. According to the survey results of the National Registration Department of Secured Transactions, information about houses and land is kept at two different agencies of houses and land. Each agency keeps a number of different documents in the land records. The current legal history of houses and land is very complicated, causing many administrative agencies, even the courts, to spend a lot of effort, time and money to find a solution.

2.3.1.3. Informal transactions still account for a large proportion

Currently, the real estate market still has increasingly common underground transactions, making the already opaque real estate market even less transparent in terms of price. Real estate registration in general is regulated in many different documents and often changes over time, so it is inevitable that there will be a lack of transparency. For the same plot of land, there are many types of documents proving the right to use. Specifically, certificates (GC) issued under the Land Laws of 1987, 1993, 2003; GCNs of house ownership before Decree 60 have not been reissued; GCNs of house ownership and land use rights issued under Decree 60; documents issued by the old regime... For plots of land with GCNs of land use rights, price transparency is much simpler than for plots of land without GCNs but have been transferred through many owners and many different people. In addition, the current status of the land can also be changed in terms of width and length; it is in an alley, but then it is put on the frontage, in addition, the land plot may have had construction works that increase the value but were not declared to reduce taxes... Price transparency is almost not achieved.

In reality, in the current real estate market, there are still two forms of transactions: official and unofficial . Official transactions are goods with ownership certificates. Unofficial transactions are goods without ownership papers, or without complete papers, the two parties buying and selling only go to the State notary without completing the following procedures. According to estimates from the General Department of Land Administration, only about 30% of real estate transactions are registered. According to Professor, Dr. Dang Hung Vo, former Deputy Minister of Natural Resources and Environment, speaking at the Anti-Speculation Conference in Ho Chi Minh City on November 8, 2007: "There are times when the amount of unofficial transactions accounts for up to 80%." The State can only control official transactions mainly by State organizations, enterprises or between companies transferring land use rights with infrastructure.

The reason for the above problems is primarily because the legal corridor still has many shortcomings. Traders always want to evade taxes so they make two contracts. Contract

The main contract according to the law will not have the price increase factor, the sub-contract by hand will be shown at the real market price. On the other hand, the current high 4% land ownership transfer tax and 1% registration fee are also obstacles in terms of financial obligations for the people. This reason, along with the reason that without a household registration book, the land use right certificate has not been issued, so people are more delayed or postpone applying for the land use right certificate. To overcome this situation, the Ministry of Construction supports the reduction of land ownership transfer tax; however, the Ministry of Finance does not agree and this issue continues to be open until May 2008. The form of real estate trading floors is considered to be effective in overcoming the situation of underground transactions lacking transparency, but the transaction rate on the floor is still too low.

The rate of not being granted a Certificate of Ownership is still high.

Table 3: Results of granting certificates nationwide as of September 30, 2007 are as follows:

Soil type

Number of GCN has been grant	Acreage (ha)	Return Rate wall	Increase with 2005
1. Agricultural land	13,686,351	7,485,643	82.1%	12.2%
2. Forestry land	1,111,302	8,116,154	62.1%	45.3%
3. Aquaculture land	642,545	478,225	68.3%	(*)
4. Urban residential land	2,837,616	64,357	62.2%	43.8%
5. Rural residential land	11,705,664	383,165	76.5%	42.6%
6. Specialized land	71,897	208,828	37.4%	85.1%
7. Land for religious and belief facilities threshold	10,207	6,921	35.7%	(**)

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2005

(*) For Aquaculture Land: Starting to issue Certificates from year

(**) For religious and belief facilities, the land is mainly practiced in three areas:

years from 2005-2007 because before the issuance of Decree No. 84/2007/ND-CP, there was no legal basis to grant land use certificates for this type of land.

(Source: Report No. 93/BC-CP dated October 19, 2007 of the Government)

Comment: The above table shows that for most types of land, the rate of incomplete land use right certificates is still high (over 30%), causing difficulties for the State in making the real estate market transparent and State management in general.

The current situation of errors in the process of granting certificates of land use rights and house ownership rights is still quite common. The results of the inspection of the granting of certificates of land use rights and house ownership rights in 2006 showed that: Among the 4,559,964 sets of documents inspected,

678,185 sets of documents had errors (accounting for 14.87%); of which, 79.64% were incorrect regarding the time limit for returning the Certificate; 8.38% were incorrect regarding the procedures for granting the Certificate; 2.74% were incorrect regarding the amount paid to the State budget; 1.39% were incorrect regarding the subjects for granting the Certificate; and 0.60% were incorrect regarding the land area. (Source: Report No. 764/TT-CP-VI dated April 18, 2007 of the Government Inspectorate)

Table 4: Data on the level of completion of granting land use right certificates for main land types in the provinces are as follows: (Main land types: Agricultural and forestry land and urban and rural residential land).

13 provinces completed over 90% including: Soc Trang, Can Tho, Lao Cai, Binh

Phuoc, Dong Thap, Dong Nai, Tien Giang, Quang Binh, Vinh Long, Hai Phong, Hoa Binh, Thanh Hoa, Ha Tinh.

14 provinces completed 80-90% including: Quang Tri, Long An, Hau Giang, An Giang, Ha Nam, Ninh Binh, Vinh Phuc, Bac Ninh, Da Nang, Ca Mau, Kien Giang,

Thua Thien Hue, Kon Tum, Phu Tho.

10 provinces completed 70-80% including: Ha Giang, Cao Bang, Thai Nguyen, Bac Giang, Hai Duong, Quang Nam, Binh Duong, Ba Ria Vung Tau, Ben Tre, Bac

Liao

24 provinces completed 50-70%: Tuyen Quang, Lang Son, Bac Can, Dien Bien, Quang Ninh, Son La, Hanoi, Hung Yen, Ha Tay, Nam Dinh, Thai Binh, Nghe An, Quang Ngai, Binh Dinh, Phu Yen, Khanh Hoa, Ninh Thuan, Binh Thuan,

Dak Nong, Dak Lak, Lam Dong, Tay Ninh, Ho Chi Minh City, Tra Vinh.

3 provinces with completion rate below 50% include Lai Chau, Yen Bai, Gia Lai.

(Source: Report No. 93/BC-CP dated October 19, 2007 of the Government)

Over 90%

From 80-90 %

From 70-80 %

From 50-70 %

Under 50 %

13 14

Number of provinces

Table 3: Classification of the level of completion of granting land use right certificates for main land types in the provinces. Comment : Over 2/5 of the provinces have not yet granted land use right certificates at the level of 70%. A proportion

significantly makes real estate market information in Vietnam less transparent.

2.3.2 Interconnection between Real Estate, Capital and Money markets

Since Vietnam carried out comprehensive economic reform (1986), the importance of the real estate and financial markets has been gradually affirmed. By 2000, a new form of the Vietnamese capital market at a more developed level was born: the stock market, where financial assets are corporate shares that are exchanged. This marked a step towards the fullness of the financial business form in Vietnam.

In 2007, the Vietnamese economy once again witnessed a sharp increase in real estate prices. A major reason was that a significant portion of the securities trading interest at the end of the 2006 fiscal year of many investors, both domestic and foreign, was converted into cash and invested in urban real estate. Then, when the Vietnamese stock market could not return to its peak of 1,173 on March 18, 2007, and continuously fluctuated. The trend of real estate investment became clear, with prices getting higher and higher. Real estate business activities were very busy, not only among real estate investors - speculators - traders, but also financial providers such as investment funds, commercial banks and enterprises with surplus capital.

2.3.2.1. Interaction between real estate and stock markets:

Real estate is almost a constant concern of individuals whenever their financial potential is improved or when it is necessary to rearrange the structure of their assets. This characteristic is even more evident when the Vietnamese economy has made positive progress, and people's accumulated wealth is greater. It can be seen that in the 1990s, our society considered real estate as a preferred means of storing value besides gold and strong foreign currencies (commonly USD). The trend of increasing real estate prices is also an important driving force that makes this market increasingly vibrant and overwhelms traditional forms of investment and savings.

Born in mid-2000, the stock market brought a new way to use surplus capital in society, not only storing value but also having the ability to bring significant profits in a short time. In the first 6 years of operation, this market did not receive much attention from economic actors. However, with the rise of the stock market from the second half of 2006 and in 2007, investing in the stock market really became an option that was always considered along with real estate. Even at many peak times, focusing resources on stock trading was a reason to leave the real estate assets being held (especially with personal decisions).

The first quarter of 2007 saw a surge in real estate demand from successful investors in the stock market. The cash received from stock investment profits not only contributed to the increase in the number of real estate transactions but also created a very high liquidity for this market. This, perhaps, was the most direct reason leading to the real estate fever during the rest of 2007.

Real estate prices in the second quarter of 2007 increased rapidly. The psychological impact is clearly shown in the hasty behavior of participating in the real estate market. Those who really need to use try to find and own real estate that suits their wishes and financial capabilities before prices escalate. Another group, accounting for 50%-

60% of real estate buyers quickly make transactions to speculate, waiting for prices to go up.

The decline of the stock market since April 2007 has forced the public to adjust their investment profit expectations and reconsider their financial potential, considering one of two options: real estate or stocks. By the beginning of the third quarter of 2008, real estate prices were more stable. Faced with unpredictable fluctuations in financial assets, investment resources were once again resolutely focused on real estate with real assets. Real estate prices did not increase suddenly but maintained a continuous upward trend, focusing on the high-end apartment sector.

By the end of 2007 and early 2008, the disappointing results in the stock market seemed to encourage many stock investors to turn to real estate. Real estate prices entered a new spiral of increase.

Table 5: Correlation between real estate market and stock market index

Real estate prices	Vn-Index
Quarter I/2007	Increase	Increase
Quarter II/2007	Strong increase	Reduce
Quarter III/2007	stable	Reduce
Quarter IV/2007	Strong increase	Sharp decrease

The correlation between real estate and stocks is very clear. The impacts are sometimes in the same direction, sometimes in the opposite direction due to the influence of psychological factors. When the stock market falls into a deep decline like the recent past, both the transaction volume and prices in the real estate market decrease sharply. This phenomenon partly reflects the movement of the Vietnamese investment public, especially in unfavorable market situations, as proven by statistical data of the Vietnamese stock market.

2.3.2.2. Legal risks make the real estate market react quickly towith changes in the financial markets

For many years, the Vietnamese real estate market has been particularly different from international markets in that the majority of people buy real estate (houses, land) with their own money, very few people use bank loans. This has begun to change in recent years and has only really changed strongly since last year, when the real estate market suddenly increased strongly. With real estate prices in some areas doubling or tripling in a short period of time, banks have raced to provide home loans and home mortgage credit has been the most popular financial service in the second half of 2007.

According to the General Statistics Office's estimate, inflation in 2007 reached double digits: 12.6%, the highest level in the past 11 years. This requires the State to take measures to control inflation. The State reviews real estate lending activities at banks. According to the State Bank, real estate lending in 2007 accounted for 11% of total outstanding debt (about 35,000 billion VND). However, there is information that the actual figure of 35,000 billion VND is much lower than the real figure. The basis for experts to predict the real figure of nearly 100,000 billion VND is the growth rate.