Conference hears market in good shape for future development and that the factors triggering a real estate bubble no longer exist.
The general perception of participants at the “Overview of the Financial-Real Estate Market in 2015 and Forecast for 2016” conference in Hanoi on December 2 was that the real estate market will continue to recover in a relatively stable manner next year.
Mr. Dang Hung Vo, former Deputy Minister of Natural Resources and Environment and an independent economic expert, told the gathering that approximately 1,200 to 1,900 successful transactions are conducted every month in Ho Chi Minh City and Hanoi. In particular, the highest number of transactions has moved from the affordable housing segment to the middle and high-end segments. Real estate credit, meanwhile, has increased sharply, and inventories have fallen by 10 per cent compared to 2014. Disbursement of the government’s housing credit support package, worth VND30 trillion ($1.32 billion), has reached 50 per cent. All of these factors show that the market is warming and has the vitality to rebound in the near future.
Agreeing, Mr. Vu Hong Minh, Deputy Secretary of the Hanoi Real Estate Club, said that the market has seen effective distribution through real estate trading floors. Investors now do not directly distribute products but do so through reputable property trading floors. This is a positive sign because homebuyers have the opportunity to be provided with multidimensional information.
Moreover, the State has issued a regulation on banking guarantees, with the aim of providing assurance of and support for the safety of people’s funds and avoid the occurrence of people putting money into real estate projects that are delayed for long periods. According to Mr. Nguyen The Diep, Chairman of the Board at the Song Hong Reenco Investment Joint Stock Company, the market has rapidly recovered since 2014 and transactions have increased 200 per cent compared with 2013. The recovery in 2015 was stronger than in the previous two years.
There was also discussion at the conference over whether recovery may result in a real estate bubble if proper control is not exerted.
Possibility of a bubble
Mr. Vo said the next phase of real estate development is completely different from the previous phase, when the market developed spontaneously. Transparency in the market is greater, investors are also more professional in their activities, and the legal framework is more complete. A real estate bubble is therefore impossible. “When there is a price spike a bubble may appear,” he said. “2015 saw a new market cycle begin with greater transparency and competitiveness, and 2016 will definitely be better than 2015.”
Mr. Diep said that, in the future, to be successful investors must understand the law of the land and capital requirements and seize the right opportunities. “For individual investors, it is necessary to select potential investors and look at potential segments,” he said. “In my opinion, private investors have to be very wise and think analytically and logically to earn profits from real estate investments.”
Economist Le Xuan Nghia, meanwhile, said that around the world the number of people investing in real estate is increasing. In the future Vietnam will have some 2.5-3 million people moving from rural areas to the city, and along with the economy growing this strong urbanization will create increasing demand for real estate.
“Demand will balance supply to 2018,” he said. “After 2018 demand will be greater than supply and from 2021 to 2023 the market may see a real estate bubble. But the bubble won’t be large because the market is more transparent and market management is more thorough.”