10:48:47 PM | 26/7/2011
Many experts point out that housing prices are unlikely to go down further because people and investors believe that prices of construction materials are volatile although the credit crunch policy adopted by the central bank is narrowing cash flows for the property market and many investors are thirsting for capital. Besides, traders always prefer Vietnamese dong to US dollars and use money to buy and sell real estate, a drop in housing prices is unthinkable, especially in the Hanoi market.
Dr Le Xuan Nghia, Vice Chair of the National Financial Oversight Committee, said that although the real estate market is “freezing” because of macroeconomic impacts, housing prices in Hanoi are unlikely to go down further on undersupply. He explained that Hanoi and Ho Chi Minh City - the two largest cities in Vietnam - always have very high demand for lodging owing to strong waves of immigrants. With an average population growth rate of 5 percent a year in couple with a considerable area of land vacated, housing prices in Hanoi are pushed up to a level that is higher than they should be.
Apart from population growth, Mr Tong Van Nga, Chairman of Vietnam Real Estate Association, said that another cause for price hikes in the capital city is many people from other provinces have flocked into Hanoi to purchase land and houses in recent years. Besides, incomes of Vietnamese people are increasing very quickly, with middle-class people and medium-sized enterprises having the fastest growth rates. These classes have a real demand for housing. In fact, the number of retail property investors is increasing, liquidity is being improved, and credits for real estate are rising. Thus, a price fall is unlikely.
To deal with capital drain and enhance market liquidity, many investors launched a variety of promotion programmes to entice buyers. They have not lowered selling prices.
Many people with real housing demand are hoping for a further decline, leading to the prolonged inactivity of the real estate market. However, experienced retail investors think that a continued fall in prices is unconvinced as this move will stain the name of project developers. Once retail prices are announced, a drop in prices means a loss in the company’s brand name. A report released by real estate consulting firm, CBRE Vietnam, showed that 8,200 apartments were offered in the first quarter of 2011, equal to a half in 2010 and up 70 percent from the same period in 2010.
In early 2011 it was expected that housing prices in Hanoi would drop sharply provided that real estate projects are mushrooming. In reality, selling prices of upmarket houses remain high while prices of average houses climbed 8.5 percent. Currently, homebuyers are unable to purchase houses at original prices (announced by investors) and the margin between selling prices and original prices remains wide. As for land market in Hanoi, projects with good infrastructure always catch the fancy of homebuyers. House and land prices in business districts tend to rise more slowly than in the suburbs because infrastructure in the downtown is downgrading and business operations generate worse profits than in the outskirts. So, many decided to sell their houses in business districts to buy new ones in the suburbs.
Mr Le Xuan Nghia said with the Prime Minister’s recent approval of new Hanoi planning in couple with the city’s review of real estate projects in May, the market will soon heat up. The Hanoi real estate market is expected to be cooled down from 2013 - 2014. Although the Ministry of Construction’s housing strategy mentions housing finance, its contents are unclear and too general. Hence, the Vietnamese real estate market is estimated to be volatile in the long term and dominated by speculators.
Luong Tuan
Vietnamese
