What should be done to improve the liquidity of the real estate market? How high should real estate prices be to stimulate demand? Vu Dinh Anh, Deputy Head of the Market and Price Research Institute under the Ministry of Finance, talks about the issue. 
The real estate market remains stagnant with prices on the decrease. What do you think real estate developers should do in the context of the tightened monetary policies and the global financial crisis which is believed will affect foreign investment flow?
 
The current difficulties require real estate developers to have character to deal with the problems. They, like stock investors, need to learn to stop losses.

The market now does not have transactions because the prices of land, houses, offices for rent and apartments all remain overly high. What real estate developers need to do now is to cut prices in order to stimulate demand and activate the market.

The prices of apartments and land have decreased by 7-10% the last few months over the beginning of the year, but the market remains frozen. How sharp do you think the price decreases should be to activate the market?

The prices of offices and high grade apartments should decrease further. I think 20-30% decreases are suitable. There have not been purchases and sales of apartments because the buyers do not have a real demand for accommodations. They just buy apartments to save their money. Apartment prices need to drop by another 10-12% in order to stimulate real demand.

The key is that real estate developers have to cut prices in order to sell products, but they will see profit decreases or suffer losses if they cut prices. Of course, real estate developers do not like cutting prices, and neither do financial institutions.

The problem now is that many banks have provided loans to fund real estate projects while real estate prices are decreasing. In order to settle the problem, the general director of a joint-stock bank has suggested setting up a fund which calls for investments from outside to buy back the debts at reasonable prices. Do you think that this is a good solution?

The measure is worth considering. However, it is still necessary to consider thoroughly the involvement of foreign investors, and about whether to allow closed or open funds.

We need to remember that the wide-scale securitisation of real estate is the main thing that has pushed the US, and the globe, into the financial crisis.

Regarding the rescue of the real estate market, I think that the government needs to take methodical measures, while it should not leave everything to enterprises.