Property Market Improves, Potential Risks Remain

It is undeniable that the property market, especially mid-level apartment segments, in recent months has recorded positive improvement. This has created certain excitement among investors.

 

However, experts said that people should be very alert, the sudden “hot” situation of real estate in a certain segment is not a firm proof to assess that the property market is really recovering. Real estate fevers in the past are still worthy lessons for investors at present and in the future.

 

Although the statistics illustrate positive signals, statistical results from the Ministry of Construction show that, from the beginning of the year, the Hanoi market has sold over 6,500 apartments, including 2,500 apartments in the third quarter of the year, up 2 percent compared with the same period last year. Price has also increased, even for mid-level and high-level segments. Currently, in many projects, investors announced a new price level, increasing by about 15-16 percent. Villas and attached house segments also tend to increase.

 

There also have many changes in terms of customers. If 80 percent of home buyers in previous years is to "surf" to make a profit, this ratio now has reversed when there is a real demand for housing occupancy rate of 80 percent.

 

By the end of the third quarter, 2014, the total value of real estate inventory has decreased to nearly VND83 trillion (falling VND12 trillion) nationwide. Comparing with the published inventory at the beginning of 2013 which is VND120 trillion, currently, one third of the inventory was liquidated.

 

Referring to statistics above, it is clearly that the market is recording a very positive improvement. However, property experts said that the “health” of the market depends on the background factors, but not only transactions published in the market recently.

 

According to Mr Tran Ngoc Quang, Acting General Secretary of the Vietnam Real Estate Association, although the real estate market has positive signals in recent times, the market still faces many challenges. Firstly, the documents of laws and policies were more realistic, but still at a low stability, lack of feasibility and being much overlapped.

 

In addition, the staff performing and supervising the implementation of the provisions of law in the field of real estate are not really professional and discipline. Elements of the real estate market such as development enterprises, investment enterprises; services business enterprises, real estate management and intermediary have not formed clearly and professionally yet. State regulations governing the operation of components are also unstable, hindering the development of this sector. Meanwhile, financial instruments to support the market and the capacity of real estate businesses are still weak; the market does not have a high degree of transparency as well as no drastic measures to improve transparency.

 

Although trading in the market has improved, it only concentrates on good-location projects in which the investor has enough financial resources to perform projects in accordance with the commitment. Currently, many projects which are available for sale but the liquidity is still quite low even though investors offer various kinds of promotion. However, the continuous sale of investors led people to think that the market has started to be “hot” again.

 

Therefore, many property experts warned that markets remain potential risks, the temporary changes in recent time did not prove anything as Hanoi still has nearly 500 real estate projects being at the risk of withdrawal because of the inefficiency in implementation. That is not to mention “paper“ projects such as B5 Cau Dien, Hesco Van Quan, Lingnan 409 in which even investors of these project have collected tens of billion VND but the project is not still deployed.

 

It is noted that the signals of the market recently are just the tip of the iceberg, whereas its content part is still a burden that hinders the property market from prospering properly in the future.

 

The important thing now is that investors and home buyers need to stay cautious, avoid being affected by rumours, leading the real estate market to return to its orbit distortion as before.