Paradoxes in Real Estate Market

According to the Department of Housing and Real Estate Management (MOC), by the end of August 2015, real estate inventories in the country had been around VND60,299 billion, down by VND3,444 billion compared with that of July 2015. In particular, the inventories of apartments were 11,693 units, equivalent to VND17,972 billion; low-rise apartments inventories were 8,641 unites, equivalent to VND14,998 billion; and housing ground inventories were 7,081,554 sq. metres, equivalent to VND22,784 billion and trade ground inventories were 1,637,782 sq. metres, equivalent to VND4,545 billion. In the city of Hanoi, the total inventory was about VND7,768 billion. In HCM City, the figure was VND11,658 billion.

 

Also in the first 8 months of 2015, the number of newly registered real estate businesses increased by 80.2 percent compared to the same period last year, the number of dissolved enterprises reduced by 26.5 percent and the number of deactivated businesses is now 390, decreased by 21.4 percent. In addition, a series of major real estate projects are going to be started in the near future.

 

However, according to real estate experts, the actual amount of inventory on the real estate market was much larger than the numbers on paper. Currently, in some urban areas such as Van Phu, Hyundai Hill State, An Hung, Le Trong Tan- Geleximco, Lideco, and Bao Son Urban Park paradise, the number of people is still fairly sparse. Even among projects located in the metropolitan area, there are still quite many units vacant.

 

The facts are in stark contrast with the information provided in recent times about the project being for open sale such as Golden West (Thanh Xuan district), Green Stars (North Tu Liem district), Saphire Palace (Thanh Xuan district), Hongkong Tower ( Dong Da district), Home City (Cau Giay district) are being sold at the prices adjusted upwards by 10 percent compared to the previous price. Even in some projects, buyers have to accept losing some money for brokers to get the apartment.

 

As reported by the Department of Housing and Real Estate Management showed that in August 2015, the amount of successful transactions on the real estate market were doubled over the same period of 2014. In particular, Hanoi had about 1,900 successful transactions, up about 5 percent from the previous month; in HCM City, there were 1,800 successful transactions, up about 6 percent over the previous month. The successful transactions focus on construction projects with fast progress, convenient location, transportation and good infrastructure.

 

Explaining the phenomenon of rising real estate prices in recent years, Nguyen Tran Nam, Chairman of Vietnam Real Estate Association, said that the increase in real estate prices was not due to speculation, but the result of the measures to remove difficulties for the real estate market in recent times. However, he also warned that when the number of transactions increased again, market supply did not meet the demand, the speculation could return.

 

The control of the market, avoiding hot development and property bubbles is essential and must be done right from the moment through the strict implementation of Decree 11/2013 / ND-CP on investment management of urban development.

 

Accordingly, the project that does not implement as request and schedule the project will be withdrawn to transfer to qualified investors. Indeed, in recent years, the property market has witnessed the sale or merger between the investors having financial capacity with the weak ones.

 

Based on the needs of the market, according to real estate experts, there will be an increase in the price of some real estate segments. Therefore, the real estate market will embrace a new development cycle in the future.

 

According to Jonathan Tizzard, Director & National Head of Valuation and Research at Cushman & Wakefield, the current problem of Vietnam's real estate market is the lags between supply and demand, because the process of building requires time, while demand generates in specific time. It means that construction cycle is behind the market cycle. Therefore, many investors who are still in the building process will face difficulty when the market demand and prices fall.

 

After a long period of frozen property market, the "thaw" began to take place; in some areas prices have regained momentum. This is an opportunity to enhance the liquidity of the market. Demand is increasing, but the market supply is still plentiful, besides there are new projects which are completed and launched to the market, which makes prices be adjusted to reduce or promotions programs increased.

 

The market continues to challenge investors who have limited financial resources. The competitiveness of the investors will decline because of pressure from businesses with strong financial potential. Therefore, from any angle, the screening makes the market become more powerful in the future. This will bring more opportunities for consumers when they are entitled to choose the most suitable products for them with the most reasonable prices.