Markets & Prices

Last updated: Monday, April 22, 2019


Supply Slows, Speculative Price Bubbles Emerge

Posted: Monday, June 25, 2018

Reporting to the 4th meeting of the Vietnam National Real Estate Association held in Quang Ngai province on June 10 - 11, Mr Do Viet Chien, General Secretary of the Association, noted that property supplies slowed in business areas in major cities in the year to date.

In Hanoi and Ho Chi Minh City, due to limited land supplies, residential land transactions were modest. A vast majority of successful deals fell into apartments, with a few being villas, adjoining houses and townhouses.

Pickup in apartment prices
According to the statistics from the Vietnam National Real Estate Association, as of May 5, 2018, affordable apartments were still main products in Hanoi.

The average price of low-end and mid-end flats increased by about 1 - 3 per cent while upmarket condominium prices marginally look up by about 0.5 per cent. The high liquidity of adjacent houses pushed up prices by 5 - 10 per cent higher since the end of 2017.

In Ho Chi Minh City, mid-end and high-end condo deals accounted for a large share. Due to the scarcity of residential land, deals dropped up to 38 per cent from the last quarter of 2017 and price of this product type kept rising.

In general, in both cities, apartment deals still overwhelmed the market, especially affordable apartments, which cost less than VND30 million per square metre. This type of housing was sold very well on high demand and low supply.

Given the limited land fund in business districts and provinces adjacent to Hanoi and Ho Chi Minh City such as Vinh Phuc, Bac Ninh, Hung Yen, Thai Nguyen, Dong Nai and Bien Hoa, the property markets started to enter a vibrant phase.

Driven by robust economic, urban and industrial development in these localities, property markets there are attracting big corporations. They are focusing on developing new urban areas with main products being residential land, adjacent houses, shophouses, villas and apartments.

Emergence of speculative bubbles
On the market, brokers and speculative retail investors released attention-grabbing rumours to push up land prices to make quick profits in suburban districts such as Ha Dong, Hoai Duc (Hanoi), District 9, Binh Chanh and Nha Be (HCM City) and their neighbouring provinces, including Vinh Phuc and Bac Ninh.

In particular, in some areas which may become special administrative - economic zones in the future, prices are spiralling up rapidly.

For example, in Van Don and Phu Quoc, when there was the first draft scheme for these regions to become special economic zones, real estate prices - mainly residential land - have increased about 80 - 100 per cent from early 2017. Vacation property products developed by big companies in Phu Quoc are attracting many buyers, resulting in a significant monthly price growth of 5 - 7 per cent.

Before this reality, the Ministry of Construction directed provinces and cities where land prices are showing signs of bubbling to check and grasp situations and clarify causes of market fluctuations to put forth measures to control this phenomenon. Local authorities have also promulgated regulations on temporary suspension of land plots (less than 500 square metres) and land transactions.

According to the Vietnam National Real Estate Association, the deal-making suspension is not recommended but a clear classification is required. Lawful deals should be still in place to develop the market and only unlawful, market-unconducive deals should be stopped.

So far, after the National Assembly suspended the ratification of the Law on Special Zones, land transactions there have declined, even retail investors fled the market, forcing many real estate trading floors to shut down.

Meanwhile, in Da Nang City, land prices have increased sharply because this segment is becoming fewer and fewer. As no new apartment projects have been launched recently, investors are mainly trading products in old projects.

Condotel and villa were relatively abundant in the first five months, mainly in high and super-high segments. However, deals are mostly reached in midmarket and upmarket segments.

In Khanh Hoa province, apartment projects in Nha Trang City mainly traded in the affordable segment. Traders traded a product many times on high liquidity and high demand from profit-making investment.

The demand for social housing is still relatively huge but the profitability of this segment is not high and not many investors are interested in. Condotel is mainly classified upmarket. Condotel prices ranged between VND36 million and VND65 million per square metre.

Remarking on market development prospects, the Vietnam National Real Estate Association said that the market will basically continue to stage stable development, market segments and product types will be restructured to have a more reasonable balance.


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