Real Estate: Safe Investment Channel in Vietnam

Although the real estate market is sometimes freezing and investors encounter liquidity problems, this market is generally stable.

 

However, due to the current low market demand, the best way for investors to boost sales is to cut prices. Thus, many forecast that the real estate market is under price-cutting pressure in the coming time.

 

According to Vietrees, a property market research company, the high-end apartment market segment is on a downward trend.

 

In October 2009, up to 37 projects announced to reduce prices from one percent to five percent compared with the previous month.

 

Although the market has actually improved, project owners continued offering more goods in the last months of the year. Only in the last three months in 2009, they offered to sell 12,000 apartments.

 

The price cutting trend is also seen in the house-on-land segment. According to Vietrees, at present, 36 projects announced abatements, compared with 23 projects in August.

 

In fact, land prices have fallen since June. Projects in the South Saigon complex have lowered prices by 30 percent from April 2009. However, there are still highlights on the market thanks to the potential and scale of the project.

 

Many customers are willing to spend no less than US$3 million to buy a penthouse with an area up to 600-700 sq. m in Sunrise City Project.

 

In November, Vietcombank bought 5,000 sq.m of floor at this commercial centre to open its Saigon South branch.

 

Dr. Do Thi Loan, Secretary General of the Ho Chi Minh City Real Estate Association (HoREA), said: “Many investors choose the property market as it is safer than gold and stock trading.”

 

Specifically, the rate of price growth in property is stronger and higher than the land price rate annually fixed by Ho Chi Minh City

 

According to Mr Nguyen Son, a specialist, it is impossible to see all three real estate, gold and stock markets overheat at the same time. If investors are interested in whichever market, cash will flow into it.

 

Gold price is currently a hot spot on the market, but according to Mr Nguyen Minh Tri, Director of Agribank Precious Fine Art Jewellery Trading Company (Agribank AJC), gold investors are exposed to danger because this investment channel investment promises high returns but also bears very high risk. Gold price movements are widely fluctuant and unpredictable. If investors do not have iron will, they should not join this market.

 

Long-term investors are returning to the real estate market because of the high demand in the future. Nowadays, overseas Vietnamese and foreigners who are living in Vietnam can purchase houses.

 

Nonetheless, real estate investment requires a large amount of capital and it necessitates careful calculations and forecasts to avoid impacting other fields in the long term. Medium-term and long-term property investment need a vision for a 3 year, 5 year and even 10 year period.

 

According to Mr Le Chi Hieu of Thu Duc Housing Development Corporation, due to large investment value, investors should consider a lot of factors in real estate investment such as liquidity, legal status, land compensation, site clearance, planning, infrastructure and traffic connections. In addition, investors should also reflect on impacts of other policies such as tax and lending from banks.

 

If tax policies work well, the real estate market is forecast to rebound soon.