“Although the Vietnamese real estate market is recovering strongly and giving a boost to the national economic development, there are still many hidden risks arising from inaccurate forecasts of market demand and actual purchasing power,” said the Vietnam Report Joint Stock Company (VNR).
Speculators corner the market
According to VNR, the demand for real estate in Vietnam is extremely high but this does not mean that the purchasing power is correlative. The reason for the mismatching is low incomes of most Vietnamese people.
Besides, the overheating or freezing of the property market have been driven by speculators, according to experts.
Reports on real estate market prepared by property management companies seem to “zoom in” the demand to create speculative waves. Many enterprises and short-term investors have taken profit from the rise in selling/leasing prices of properties. However, in the long term, this actuality will damage the economy.
Driven by speculators, real estate prices in major cities in Vietnam are rated too high in relation to incomes of the people, the economic growth as well as the real value of real estate.
High land prices not only reduce the demand of the people but also increase burdens on investors, especially investors of industrial parks. Project costs surge on growing expenses for site clearance, land compensation, etc.
Unclear State responsibilities
According to VNR, apart from the cornering by speculators, the market lacks a good regulatory regime for housing market, new urban zone, apartments and office for lease. In fact, many investors sold out all products in their new urban zones, apartment blocks and offices when their projects take shape only. Many projects have changed investors and sometimes sellers are not the investors. To buy land plots and houses in new urban zones at acceptable prices, most buyers have to deposit money for project investors when they lack legal conditions to sell houses (foundations have not been built). Therefore, both investors and buyers dodge the laws by signing business capital contributing contractors or investment contracts. As a result, buyers are not protected when conflicts happen. Buyers of houses and lands will lose more in this case.
Another reason leading to the high risk in investing in the real estate in Vietnam is the limited approach to land, planning and construction information in Vietnam. The people with real needs for houses and lands to live hardly have direct information on real estate products. Thus, they have to buy houses and lands after they are transferred through many dealers.
At present, Vietnam lacks a gauge for the real estate market in spite of being at the lowest level. In the world, there are many popular real estate indices such as housing price index, internal rate of return (IRR), and Real Estate Market Index (REMI).
Luong Tuan
Vietnamese
