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Large supply a counterbalance

Released at: 09:34, 28/08/2015

Large supply a counterbalance

Mr. Nguyen Tran Nam, Chairman of the Vietnam National Real Estate Association (VNREA), tells VET a real estate bubble is unlikely due to stable prices and substantial future supply.

by Quynh Nguyen-Huyen Ngan

How would you assess Vietnam’s real estate market in recent times?

The market has been growing strongly and sustainably. In the first seven months of this year the market continued to be vibrant, with a large number of successful transactions in Hanoi and Ho Chi Minh City and confidence among buyers being gradually restored.

Hanoi’s market in July saw 1,800 successful transactions, an increase of 3 per cent compared with June. In the first seven months there were a total of 11,050 successful transactions in the capital. Meanwhile, in Ho Chi Minh City there were 1,750 successful transactions in July, increasing 3 per cent against June, and 10,500 successful transactions in the first seven months.

With such a large number of transactions is there a risk of a real estate bubble reappearing?

A real estate bubble is unlikely to occur, with only certain projects in prime locations and with high quality seeing price increases of 1 to 2 per cent. Overall, although transaction numbers have increased sharply, prices have remained stable.

Many new projects will open in the future and create a large amount of supply. With increasingly professional investors and brokerages, housing prices will not spike, so a real estate bubble is unlikely. However, we must also prevent some businesses and individual brokers or speculators increasing prices and creating instability in the market.

Will real estate be an attractive investment channel in the future?

For the past seven months, GDP growth, the financial and monetary situation, imports and exports, and FDI have all seen positive signs. The target of 6.5 per cent economic growth this year will almost certainly be achieved. The economy’s recovery has seen a contribution from the real estate sector, which in turn has benefited from economic growth.

Much investment capital has flowed into the real estate market. Outstanding credit in real estate has reached over VND360 trillion ($15.8 billion). From July 1, with the Law on Housing permitting foreigners to buy houses in Vietnam, a large number of foreign investment capital has come to the real estate sector.

Foreign direct investment (FDI) in real estate is increasing sharply. According to the Foreign Investment Agency under the Ministry of Planning and Investment it ranks second among 17 areas attracting foreign investment in Vietnam. In July the real estate market welcomed over $1.225 billion from foreign investors.

Investment capital flows into property proves that it is a good investment channel at this time.  

Many people are concerned about too much investment capital flowing into real estate. What are your thoughts on this?

I disagree. Growth in the property market will lead to many other sectors developing. Tax revenue from real estate businesses and real estate transfers will certainly increase. We recommend management agencies as well as businesses continue to promote real estate development. If not, the market will get into difficulties, as it did in the last few years, and have a negative impact on the economy.

Although the real estate market is on the increase, investors should not expect too much. Real estate brokers must operate honestly and keep prices stable in order to bring benefits to customers based on professional ethics. The property sector must have mutual supervision in the future, aimed at a professional and sustainable operating environment.

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