Hanoi Real Estate Longs for Capital

For years, the realty price graph in Hanoi has always been upward or at worst stood still for several months. However, it has witnessed some changes since Quarter II, 2011, price in segments has stayed still and begun going down; some segments have even fallen sharply, such as segments of condo and project ground.

 

Back to the beginning of 2009 when the economy came over the crisis, there was a vibrant wave in real estate. Condo segment suffered a fever like it had never done before. There were a total 8,000 new apartments released, most investors ran out of products and it was demand exceeding supply that made the price acceptable, despite how high it shot up to.

 

Then came the ground fever in Eastern and Western Hanoi, the number of purchasers was multiple times higher than sellers, which pushed up the land price daily. By the beginning of 2011, the average price in West Hanoi has gone to three times higher than in early 2009.

 

Entering 2011, when apartment supply shot up dizzily, plus restraints on hot development of the market begin to work, as well as due to difficulties caused by objective factors in the economy, realty market begins to stay still. Many investors taking bank loans to pilot apartments have fallen into serious difficulty, having to discount by hundreds of millions of VND but without buyers, whereas the apartment’s investors offer to discount prices up to 12 percent.

 

Sharply falling price in realty market also happens in segment of land, current ground price in some projects in West Hanoi has decreased by VND 5 – 10 million per square metre, especially projects such as Geleximco, and Kim Chung – Di Trach.

 

Despite its falling, according to some economic experts, the current realty price still doesn’t properly reflect its real value. In some segments, realty products’ price is still three to four times higher than its original value. Realty investors and businessmen still pursue personal profits, which makes the realty market always suffer a “bubble”. Land speculation accounts for 70 percent of successful transactions.

 

According to statistics from an international organization, Vietnamese index of house price/income has come up to 24.5 – 26.6, which is much higher than other Southern Asia countries (6.25) and Europe, North America (6.25).

 

When the market pie becomes smaller and smaller due to less profit and greater risk, a large number of investors begin to turn away the market. Once money inflow into the market gets frozen while initial inflow should be drawn to pay off bank loans, land price will have no choice but to decrease.

 

2009 saw Hanoi realty market enjoying new wave thanks to speculators’ kicking up price and rumours, they themselves now hold those products frozen. There may be some speculators foreseeing the situation, offloading their property, calling back capital, gaining large profit and thinking about shifting their investment into other much higher potential fields.

 

In the current context, suggested realty experts, 2011 will hardly witnesses a breakthrough in Hanoi realty market to set a higher record than the old one; even though there will be some little waves, locally somewhere with sudden changes of plans and transportation. Investment will quickly move from conception of value to usage value. Therefore, the segment of housing for low and medium income will still draw a lot of attention.

 

Luong Tuan