Real estate identification at the end of the year

Excess of supply over demand in premium real estate is not representative of the real estate market in the whole country. Photo: H.Anh.

The market slows down, has volatile elements

Since the beginning of the year, market movement has shown that the real estate market in 2016 is still a continuation of the positive recovery signs since 2014. Real estate has been ranking the second in attracting foreign investment with $US 1 billion of investment in this area. Besides, the number of newly established real estate enterprises also increased 99% of quantity and 242.5% of capital. Trading volume on the market, average selling prices were relatively stable, with a slight increase but not in the overall market, which mainly focused on projects with favorable location and complete infrastructure.

However, in terms of growth, the market is showing signs of slowing down compared to the speed of 2015. Data from the Savills Company shows that, even in Hanoi, the number of transactions as well as the supply have slowed in the third quarter of 2016 when about 5,700 units were sold, down 6% compared with the second quarter and decreased by 15% compared to the same period of 2015. In HCM City, in the third-quarter, the apartment trading volume rose sharply compared with 2015, but in the review of the HCMC Real estate Association (HoREA), although the market is still in the growth cycle, it has shown signs of slowdown and potential instability, if not handled promptly and satisfactorily, they could cause negative impacts on the stability of the market. Currently, the market has seen unequal development between supply and demand, in which, the growth of premium real estate segment has been huge, a lot of premium and luxury real estate projects, resort real estate projects have shown signs of supply exceeding demand, while the segment of commercial real estate has seen a lack of projects with 1 to 2 bedroom apartments priced around 1 billion VND as well as commercial housing projects rented cheaply from 1.5 to 3 million VND per month and social housing projects.

According to Mr. Le Hoang Chau, the chairman of HoREA, in the last 9 months, the city recognized 47 housing projects implemented in the future which met conditions to mobilize capital with the scale of 24,461 houses, in which the mid-premium and premium real estate products accounted for the largest number. Along with an increase of premium real estate projects, in the first 9 months of 2016, the HCM City real estate market continued to have a very large increase of secondary real estate investors who bought to rent, but most of them bought to resell for profit. In particular, they concentrated mainly in the premium and above average sector, which accounted for approximately 50%, depending on the projects. Even for foreigners who have bought houses in Vietnam, through the survey of CBRE, most of them also aimed to invest and do business, while only 29% of them bought to live in. “Compared with the real estate bubble in 2007, secondary investors accounted for about 70%, the current rate (around 50%) is also very worrying” Mr. Le Hoang Chau, the Chairman of HoREA stressed.

Excess of supply over demand in premium real estate is not representative of the real estate market in the whole country, not only in HCM city, but also the Vietnam Real Estate Association recommended this issue to the Government, the Ministry of Construction, and the State Bank. This excess, according to experts, will affect the market at the end of the year.

Less vibrant?

From now until the end of the year, market supply will increase sharply, because along with the projects opened for sale, more projects launch goods to seize opportunities at the end of the year. In the market, a lot of projects have opened for sale such as the Richmond Cit premium apartment project, the Moonlight Residence project, the FLC Star Tower project, The View project at Riviera Point, and the Palm Heights project. Besides, falling lending rates in the money market will impact positively on the market. Commenting on the market in the end of the year, Mr. Le Hoang Chau said that the HCM City market will continue to grow slightly compared to the third quarter, due to being the peak period of the year. However, the overall real estate market is showing signs of slowing down compared to 2015.

Talking with Customs News, Mr. Tran Duc Dien, the Chairman of the board of governors of the Maxland Company said, up to this time, the market signals were still normal, significant changes were not seen, one of the reasons was that real estate was vibrant at the beginning of this year, while the market in the end of the year is facing pressure because of large supply. Mr Dien said that the lending rates are being adjusted lower to impact positively on house purchasing behavior, because with a lower interest rate, investors can borrow with lower rate, but the decrease is negligible.

According to a study by reporters, some premium projects opened for sale 2 to 3 years ago, until now, prices have fallen. For example, the Mulberry Lane apartment building project in Ha Dong, in the first phase, this project had been sold at 33 million VND/m2, but now some apartments are offered for sale with prices only from 26.5 -28.5 million VND/m2. According to a real estate agent in the area of Cau Giay, some projects opened for sale not long ago, but the situation appeared that if the investors had bought at the time of opening for sale and resold at this time, they would have lost when the price fell because of the sales policy of investment owners, while investors also had to pay broker cost for the trading floor, and loan interest.

Mr. Nguyen The Diep, the Deputy Chairman of Hanoi real estate club also said that normally, the fourth quarter would be more vibrant than the beginning of the year but this year is not as vibrant as the previous year, though demand has increased. According to Mr. Diep, the reason was that the package of 30 trillion VND stopped and buyers have not accessed new alternative capital sources that impacted on house buyers and real estate investors. This created dangerous gaps that could lead to the monopoly phenomenon of some big companies, pushing up prices, which could impact on the market dangerously, resulting in a “bubble”. For example, some large enterprises in Hanoi pushed prices up even hundreds of million VND per m2, this never happened 4-5 years ago. Therefore, how policies encourage all businesses, not to priority some big business deals, leading to the monopoly.

According to experts, with the abundant supply of products, including the increase in FDI into Vietnam, customers will have more choices, this is a factor affecting the market, making competition in the market among investors, real estate trading floor will become fiercer. In general, for balanced and sustainable market development, according to experts, we should focus on creating conditions for the segment of cheap housing and social housing, because in fact, compared to other segments, this segment is very dynamic, products offered for sale offer good liquidity, quick transaction. This segment values are not great, but create huge motivation for the real estate market, contributing to make the market lively and impacts on the other segments.