Real estate market report (June 19th, 2009 – June 25th, 2009) Are property prices “being inflated”?
Article
(Listed Jul 1, 2009)
Last week, the property market in Hanoi and HCM City continued to be ‘hot” in some areas. However, many experts warned that when the more property prices increase partially, the more prudent buyers must be to avoid falling into “price inflation” trap of brokers and investors.
According to information from the speculators, from early June, 2009, foundation land prices in Van Khe urban area (Ha Dong) have risen by VND5 million – VND7 million per sqm compared to late 1st quarter, 2009. In other urban areas such as Van Quan, Xa La or Van Canh (Hoai Duc), foundation land prices have also increased from some millions to ten millions per sqm. Foundation land prices in Duong Noi urban area (Ha Dong) have risen by 20%-30% because of sponging on Le Van Luong and Le Trong Tan streets.
Similarly, right in Highway 32 (section from Nhon to Son Tay), transactions adjacent to Tan Tay Do urban area project have also been busy, rising from VND8 million – VND16 million per sqm. The auctions in Cau Giay new urban area have become hot, specifically winning price is 4-5 times as high as floor price, up to VND106 million/sqm for the highest. According to evaluations from many investors, this price rate is rather high compared to the current. Many experts said that foundation land prices in some projects in Hanoi have suddenly increased because of “being inflated”, busy transactions are mainly “thanks to” the speculators.
A property investor said “Three months ago, a prime foundation land plot in Tan Tay Do new urban area was worth VND8.6 million/sqm (the original price was VND6 million/sqm). To date, selling price is up to about VND16 million – VND17 million per sqm. Transactions in this project are rather busy. Prices have partially hiked because of “being inflated” while transaction increase mainly depends on investment; those who have demands of buying houses are not much.”
Besides foundation land, prices of many apartment buildings in Hanoi have climbed by VND4 million – VND5 million per sqm. For example, few months ago, apartment building N05 in Dong Nam new urban area, Tran Duy Hung street was advertised to sell at VND24 million/sqm, but at present, its price is risen by VND500 million/unit.
Analyzing about this situation, many people told that property is still a safe and high lucrative investment channel. Last time, the quiet market is because of being affected from financial crisis and global economic recession, making many people worry and have a psychology of wait. At present, the economy has signs of recovery, so well-to-do people return to invest in property causing such a partial fever…
Tran Du Lich, Deputy Head of the National Assembly Representative Committee from Ho Chi Minh City, judged “In fact, there is a certain rate of shifting investment channel from stock to property. Thus, housing prices have increased in some places. Up to now, property is still a safe and high lucrative investment channel; so, many investors want to pour their money into. However, there are many implicit risks. For this reason, I want to warn that the investors must be prudent because the property market, even the stock are likely to fluctuate tenaciously and fairly urgently in the saw-tooth shape and will have certain risks”. Dr. Nguyen Minh Phong, Hanoi Social-Economic Development Institute told that in the next time, housing prices will continue to rise in the economic growth trend. “For my view, it’s difficult for “a fever” to occur like in 2007”, Phong said.
It’s difficult for the property market to recover in the short-term
Le Dang Doanh, an economic expert, said that during the recent time, the property market warmed up because material prices were decreased and credit monetary policies were loosened, especially the Government’s stimulus package made positive economic impacts in the 1st quarter as well as in April, May, 2009. As a result, the investors’ trusts appear signs of recovery in some extent. However, according to Doanh, for the economic situation in the next time, the property market has been still unstable. This concern is very reasonable because according to the statistics from credit organizations, non-performing loans for property is approximately 5%. According to many experts, this rate has reached to worrying non-performing loan rate in the banking system.
Answering to the press, Nguyen Van Duc, director of Dat Lanh Real Estate Company stated “Because of not affording to pay debts, many investors must sorrowfully witness their assets to be confiscated by banks. As a result, many investors must cut the prices to earn money for debt payment, making housing prices be lowered further.”
According to property experts, the fact that the investors rush to sell their products to withdraw capital, deal with financial difficulties makes project land prices in large cities decrease sharply, even by 40% - 60%.
A solution for this situation is foreign direct investment (FDI) into property sector. However, economic experts analyzed that FDI capital into property sector increased alarmingly. In first 5 months of 2009, FDI capital registered for property has been up to $1.45 billion, in which new registered capital is focused mainly on 19 projects.
Click here to search for apartments or houses in Vietnam Click here to post your property for sale or rent in Vietnam However, Le Dang Doanh said “We’re cautious of these project types because the investors investing in projects have occupied lots of land, beautiful locations. At first, we can attract many investments but for a long-term, there will have many other risks. For instance, there isn’t any more beautiful beach in Da Nang. Now if wanting to take a bath, we must go to foreign resorts. This is a worrying problem.”
Last week, the property market in Hanoi and HCM City continued to be ‘hot” in some areas. However, many experts warned that when the more property prices increase partially, the more prudent buyers must be to avoid falling into “price inflation” trap of brokers and investors.
