Real Estate Market Likely to Get Heated Late This Year

Fledgling and huge potential, the Viet Nam real estate market has opened many opportunities for dynamic investors. With the growth rate of over 30 percent a year, it has a large attraction with the smart money flow. The Prime Minister has recently issued a direction No. 854CT-TTG to approve in principle a plan by the Ministry of Construction to set up a real estate business group. This is one of good signs to heat the real estate.

Fever beginning in early 2007 to late 2008 is the hottest fever that investors have witnessed so far. Huge capital mobilised from the stock market, FDI capital and expanding loans for real estate projects swallowed up small capital provisions. Investors with excited psychology bought most of real estate projects without their quality and potential. Not only hot real estate projects at that time such as Phu My Hung, Thao Dien, Him Lam Kinh Te, the fever also spread to projects in outskirts of neighbouring provinces of Binh Duong, Long An and Dong Nai. Although land and high-grade apartment prices were marked up, they did not meet the demand. Many people had to buy back permission to buy high-grade apartments of others with the deference in price of hundreds of million Vietnamese dong.

The fever ended in the middle of 2008 and really froze in the next time. Investors who had bought real estate projects especially high-grade land and apartments suffered hard losses. Land prices of some projects decreased by between 50 percent and 70 percent. Many people who had mortgaged their houses to borrow loans from banks to invest in high-grade land and apartment projects were in the peak of bankruptcy because of the high loan interest rate while the sharply decreasing real estate prices. Not only investors were in the danger, banks that had provided loans for the investors to pour into real estate projects also were in risk of not recovering their loans of up to 70 percent of pledged assets. 

This year, in line with the scenario of the stock market with the growth rate of over 102 percent (from 235 to 550 points) and easier credit conditions with VND 420,000 billion in a programme by the government to subsidy 4 percent of the interest rate, the scenario of real estate fever in 2007/2008 is likely to happen again. In fact, the housing market is warming up. The number of successful transactions is increasing considerably compared to those in the frozen period. Land prices of some projects have increased by 20-30 percent against early 2008.

 

Enterprises have taken full advantage of the easier credit conditions and huge capital mobilised from the stock market and FDI to carry out large-sized projects to build high-grade apartments, houses, offices for hire such as 200,000-square-metres Sunrise City project of the Novaland Company, 112,000-square-metre Hoang Anh River View project of Hoang Anh Gia Lai Group and 200-hectare An Khanh urban area project of the Sudico Company, leading to the more and more rising number of buyers. Due to credit crisis in many countries, investors will be careful to invest in Viet Nam in general and its real estate market in particular. Therefore, the real estate market is likely to re-warm but not hot in the 2007/2008 period.

 

In medium and long-term period, investing in the real estate market to wait in front the developing economic period after the crisis may bring success to investors. It is necessary for investors to choose exactly the time to invest in the real estate market. With current competition, enterprises who can meet the demand best and cheapest will win.