Domestic property price to be stable in second half of 2019

The domestic real estate market in the second half of this year is not expected to witness significant changes in price due to stability in supply, according to experts.
Domestic property price to be stable in second half of 2019 ảnh 1Illustrative image (Photo: kinhtedothi.vn)

Hanoi (VNS/VNA) -
The domestic real estatemarket in the second half of this year is not expected to witness significantchanges in price due to stability in supply, according to experts.

During the last six months of this year, the medium-and high-end apartment market would not see any price fluctuations, said NguyenMinh Ngoc, the Vietnam Real Estate Association (VNREA)’s market researcher.

However, some products in those segments wouldexperience a slight decrease in price because of more preferential sellingpolicies for customers, he said.

The second half of the year would also be the periodin which investors would have to boost liquidity to recover capital and preparefinancial resources for investment next year, Ngoc said. Therefore, customerswith low capital would find it easier to choose a suitable product.

According to the VNREA, the local property market willhave a stable supply by the end of the year because the market has a largeapartment inventory from the three previous years, though the supply of newapartments has dropped from the beginning of this year.

"The new supply has dropped but there is highinventory of apartments so sellers must have more policies for their customersto increase liquidity for collecting capital. Thus, the possibility of priceincreases will be very unlikely and the price could drop slightly compared withthe same period in 2018 due to better selling policies,” Ngoc was quoted bythe Kinh te do thi newspaper as saying.

“By the end of this year, the change of credit policyfor the real estate sector in promoting control and reducing credit scale willhave a significant impact,” said Nguyen Manh Khoi, Deputy Director of Housingand Real Estate Market Management Department under the Ministry ofConstruction.

Nguyen Tran Nam, VNREA chairman, said there was aconcern about the real estate bubble, so the Government has taken steps tolimit credit sources to real estate and the Government will be likely totighten further in the future.

Thus, credit growth in real estate began to declinefrom the end of 2018. On the other hand, the volume of land for housing plansand compensation has been tightened while people's purchasing power is stillvery strong.

From the beginning of this year until now, foreigndirect investment (FDI) capital into Vietnam’s real estate market has increasedsharply against the same period in 2018 and reached the highest level in thelast three years, reported vov.vn.

In fact, the new higher investment has not helped therelease of more new products because the existing high inventory has madeinvestors limit the increase of supply.

In addition, the land fund in big cities, such as Hanoi,HCM City, Da Nang and Nha Trang, is in short supply.

Meanwhile, new projects are slow in developing due todifficulties in compensation and site clearance, leading to the scarcity ofland fund and high land prices.

According to VNREA's researcher Ngoc policies onreal estate finance are having a great impact on promoting investment ofbusinesses. Now, the Government has permitted the use of 40 percent ofshort-term capital to be medium and long-term loans for property projectsinstead of 60 percent as before and the percentage will be reduced to 30 percentin the future.

The tightening of financial credit policy will forceinvestors to build new mechanisms for their own development roadmap, andsecondary investors will have to determine reasonable investment levels fortheir ability.

The Vietnam Real Estate Brokerage Association saidfrom the beginning of this year until now, new real estate supply tended todecrease, especially in two big cities, Hanoi and HCM City.

Total housing supply in Hanoi decreased by 25 percentyear on year while in HCM City, the reduction rate is even higher at 50 percentof total supply.

Experts said that the decrease in new supply was dueto high inventory of apartments over the last three years with total value ofinventory at VNĐ23 trillion.

Condotels were the product with the largest inventory.This segment in coastal provinces and cities had the absorption rate of only 40percent, thus its inventory was up to 60 percent.

The strongest points of Vietnam's real estate marketare huge demand and ability of liquidity, according to Nam.

The local property market in the medium and long termwill be very good as urbanisation will be very high. According to statistics,as many as one million people move from rural areas to urban areas each year."The important thing is to have quality property products for them,"Nam said.

According to a report released by propertyconsultancy Savills Vietnam, an optimistic economic outlook, high levelsof FDI and suitable monetary policies ensure that growth in Vietnam’s propertymarket will continue, whilst increased supply is projected in key cities tomeet demand.

The majority of stock by 2020 will be grade C in HCMCity and grade B in Hanoi.

The country's two major cities, Hanoi and HCM City,are undergoing dynamic transformations and attracting high levels of FDI andwaves of new investment.

They account for 17 percent of the country’s totalinhabitants and have the highest urbanisation rates in Southeast Asia.

Strong population growth in urban areas has createdrobust demand for housing.

The majority of new supply comprises lower gradeapartments, directly correlating with demographics and macro fundamentals.

Between 2014 and 2018, substantial sales increasesoccurred in both cities.

In HCM City, transactions have been rising by 44 percenta year for the last five years, peaking in 2018 at above 49,000.

The absorption rate recently hit its highest level inthe last five years of 87 percent.

Last year, home sales in Hanoi increased by 20 percent.Between 2014 and 2018, grade B accounted for 43-61 percent of sales and grade Cfor 31 percent. Grade A accounted for 8 percent due to a combination of highselling prices and limited new supply.

The performance of the high-end segment (grade A) hasimproved in the last three years, attracting local and foreign buyers withcompetitive prices and appealing rental yields.

Last year, Hanoi and HCM City saw high demand frominternational buyers. Most grade A projects quickly filled the foreigners'quota of 30 percent.-VNS/VNA
VNA

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