August 11, 2020 05:26

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Five Rs for real estate businesses

10:06 | 12/07/2020

VCN- After the pandemic, real estate businesses need to implement five Rs, including respond, recover, re-invent, restructure and resilience. This is the opinion of economist Can Van Luc (pictured) on the effects of the Covid-19 pandemicon the real estate market and solutions to recover in the post-Covid market.

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Economic expert Can Van Luc.

Could you please tell us your assessment of the impact of the Covid-19 pandemicon the economy, including the real estate market?

We selected fifteenimportant economic sectors directly affected by the Covid-19 pademicinVietnam (accounting for about 78% of GDP in 2019), thereby calculating the impact of the Covid-19 pademicfor the economy in general and Vietnam’s real estate market in particular.

With the result of the calculation, if the decrease of less than 5% is considered a minor impact, a reduction of 5-10% is considered a moderate impact and a decrease of over 10% is a major impact. The impact of Covid-19 pandemic on the real estate market is reflected in the following figures: the total value of real estate products decreased by 31% in the first quarter of 2020 compared to the same period in 2019. Stock price movements of real estate businesses in five months compared with the beginning of the year decreased by 13.3%, while the construction industry decreased by 6.7%.

Thus, stocks of the real estate business are also negatively affected, but we believe that the impact level is in the middle, meaning that the impact is not too terrible compared to air transport or tourism. The number of businesses suspending operationsis about 88% in the first five months.

With the above-mentioned impacts, how do you predict the trend of the real estate market in the post-Covid-19 period?

Regarding the trend of the real estate market in the post-Covid-19 period and the psychology of the market, the old investors will be more cautious, if they meet difficulties and obstacles in projects, investment will be delayed. With the "cash is king" mentality, in the context of economic instability, investors often keep capital and focus on investing in markets they already know.

The new investor group has a more conservative strategy, they will be more cautious, and large investments are expected to be suspended, except for ongoing transactions. In particular, the lifestyle and working methods have changed a lot after the epidemic, whereby the trend of distance working and online shopping are more popular, arranging production places near the source and storage factories, less business trips, more online education and training, etc.All of these factors will have a strong impact on demand.

Besides, some big barriers still exist in the market, likea lack of transparency, land fund, capital, legal review. The market is still facing limited supply due to legal review, defensive psychology, financial difficulties and output. In the future, the M&A trend will also increase due to risingdemand for property sales, affordable prices and businesses have a strategy to disburse. At the same time, the trend of digitalization and transparency of the real estate market is indispensable.

In this general trend, we forecast that some segments will face more difficulties, such as retail space, offices for lease and real estate for tourism, resorts and adjacent villas. That requires specific solutions for each segment.

With the retail space, the requirements and solutions for this segment are to be flexible, organize multi-channel and multi-modal sales; develop the relationship between the lessor and the lessee.

In the segment of office for lease, besides flexibility, it requires elements of working space and appropriate design changes. With real estate tourism, resorts, adjacent villas, need professional management, care factors hygiene, health safety, and not too crowded.

Some segments that will face with more difficulties, we realize that there will be some more favorable segments, such as logistics real estate, residential real estate and industrial real estate.

With logistics inreal estate, the requirements in the near future arethey must be near the source of the production place, diversify input sources, facilities, flexibility, quick response. Housing real estate will have to take into account several trends such as multi-family model, and the rise of mid-end and lower-priced housing. Industrial real estate will also require a lot of clean land and professional management and paying more attention to infrastructure and services for industrial parks, factories for rent.

To recover the real estate market after Covid-19, what solutions do you propose?

To restore the real estate market after Covid-19, we need to implement the support packagesquickly and effectively. Currently, the Government has issued many packages to support businesses and workers facing difficulties due to the Covid-19 pandemic.

These support packages need to be implemented faster and with the right subjects to promote their effectiveness.

Besides, it is necessary to promote and exploit six growth engines including promoting export in potential markets right after the pandemic is controlled (US, EU, ASEAN and South Korea); acceleratingthe disbursement of public investment; promoting private investment; taking advantage of opportunities to attract foreign investment; stimulating domestic consumption demand; developing digital economy, digital business and e-government.

At the same time, it is necessary to promote the substantive improvement of the investment-business environment, especially the reform of administrative procedures.

I also think that it is necessary to quickly remove the legal barriers for the real estate market such as supplementing and completing the legal framework for new models such as Condotel, Officetel, Shophouse, etc.

One solution to be considered is to promote demand for housing by having policies to cut housing transaction costs (registration fees, housing fees); promote housing loan support package; research into the establishment of housing financial institutions such as housing development funds, housing savings banks.

Regarding medium and long-term solutions, it is necessary to continue improving institutions related to real estate, formulating projects/strategies for managing and developing the real estate market. Attention should be paid to planning issues; real estate finance like taxes, investment funds, trusts, capital markets, real estate financial institutions, re-mortgage lending agencies and "Digital real estate".

Databases, information about the real estate market; research and forecast the real estate market with the development of real estate indexes; management institutions and human resources operating the real estate market.

For real estate businesses, what solutions do businesses need to survive and develop after the Covid-19 pandemic?

I think that after a pandemic, real estate businesses need to implement the five Rs model, including respond, recover, re-invent, restructure and resilience.

At the same time, it should focus on four important issues: employees, financial management, customers and partners.

Enterprises also need to develop and implement working regulations in the context of the "new normal", develop and implement a digital business strategy, strengthen connectivity, establish and proactively position in the value chain, promote the role of industry associations.

In particular, real estate businesses need to diversify capital sources, because now over 80% of small and medium enterprises in Vietnam rely on bank capital; strengthen connectivity, establish and proactively positioning in the value chain; uphold the role of industry associations.

It can be said that 2020 is a year with many difficulties and challenges for the economy as well as the real estate market. Therefore, it is necessary to prepare thinking and take advantage of new business trends in the new context.

In 2021, it is forecasted that astrong recovery ability that will require enterprises to be in good spirits and soon seize new opportunities in the new period.

I emphasize that thefive Rs model is worth using now, along with that, it should be determined "people and technology" are always two strategic breakthroughs for real estate development in the new period, especially after Covid-19.

By Thu Hien/Quynh Lan