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Last updated: Tuesday, January 17, 2017

 

Stepping Stone for 2017 Real Estate Development

Posted: Thursday, December 29, 2016


The Vietnamese real estate market ended the year 2016 without the formation of any bubble as warned by experts at the start of the year. Growth remained stable, but there were signs of supply-demand imbalance and credit imbalance.

Signs of supply - demand imbalance
At a recent workshop titled “Property market prospects in 2017 - Policy impacts” hosted by the Vietnam National Real Estate Association in Hanoi, a majority of speakers shared the same view on emerging supply and demand imbalance from the second half of 2016. Some of newly issued policies were slowly brought into effect, particularly foreign ownership regulations. At present, property investors are very concerned about credit policy and proposed taxing multiple-house owners.

Mr Nguyen Tran Nam, former Construction Deputy Minister and Chairman of the Vietnam National Real Estate Association, said the Vietnamese real estate market showed positive signs of recovery in 2016 after a long lacklustre period. With a population of 94 million and a housing area per capita of 22 square metres (according to data released by the Ministry of Construction in September 2016), this housing area is still relatively modest compared to other countries in the region and the world. Thus, the housing demand in Vietnam is still huge. Furthermore, high urbanisation speed, opening policy and commercial facilitation have caught the fancy of foreign investors in the real estate field.

Remarking on the property market in 2016, Mr Nguyen Manh Ha, Vice Chairman of the Vietnam National Real Estate Association, said that all segments are developing well, especially high-end segment and vacation property. Developers and investors have more active approaches to the market to balance the market demand and supply and seek the most lucrative segments. Social housing and affordable commercial housing are the biggest segments. Property investors, brokers and distributors are developing more professionally towards sustainable development.

Property products launched in 2016 also significantly improved, not only in upmarket property, but also buildings and urban areas, even separate apartments. Mr Ha said the supply and demand imbalance arose from the strong supply of upmarket segments in the midst of weak supply of downmarket segments in the past year. He added that investors now mostly focus on developing high-grade products, while 70 per cent of the market demand falls on mid-market and downmarket segments. Currently, the price of commercial housing of about VND15 million per square metre is not popular because of low profitability.

He admitted that the property market in 2016 still exposed a lot of shortcomings, such as insufficient credit and inadequate market development policy. In addition, the information system for the property market remained weak and insufficient; the transparency of the property market also needed to be further improved; and investors, distributors and authorities needed to be more professional.

Property market likely to see no breakthroughs in 2017
Professor Nguyen Mai, representative from the Vietnam Association of Foreign Invested Enterprises (VAFIE), noted the supply and demand balance will lead to a worryingly skewed slide of the property market. However, the real estate market will still develop, expected to be driven by strong foreign inflows from investors in Japan, South Korea, Singapore and other countries. In 2015, this boosted the development of the property market because of Vietnam’s better investment environment and competitive advantages over other countries in the region.

Associate Professor Tran Kim Chung, Deputy Director of Central Institute for Economic Management (CIEM), said potential uncertainties in global economies may lead to unexpected changes in the property market in 2017. Vietnam's economy in the coming period is still adapting, adjusting, changing and growing in substance. However, there are still significant barriers to solid growth and changes to growth model.

Clearly, the property market is gradually stabilising and substantially developing. The market is shifting towards the majority. Thus, the property structure has shifted from the mid-market and upmarket segments to the downmarket segment. Nevertheless, the market is likely to stage a sideways trend in 2017. Some segments may undergo a downward correction while others may slightly go up.

Remarking on the property market in 2017, Mr Nguyen Tran Nam said the development may be not much different from 2016. In spite of little general improvement, significant growth is expected to happen in affordable and social housing segments, thanks to possible soft loans provided by the State, which target buyers of houses smaller than 70 square metres sold at about VND15 million per square metre. In addition, premium segments and vacation property products may shrink. The market structure of products is expected to be more stable and balanced in the coming time.

Luong Tuan

 





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