Ministry warns about imbalanced development in property market

Hanoi (VNA) - Early alarm bells have been rung about the potential imbalanced development in supply and demand in the realty market.

According to the Ministry of Construction’s Department of Housing and Real Estate Market Management, the domestic property market might see a shortage of mid-tier housing supply, and abundant supply in the high-end segment in late 2016.

Although the market is on a stable recovery path, this is a matter of concern as a majority of the local citizens want affordable small or medium-sized apartments.

In addition, the recent rise in the number of secondary investors, who purchase houses for rent, for example, might trigger a wave of speculation, threatening the recovery of the realty market.

The Vietnam Real Estate Association said the property market did not see many new housing projects during the first half of this year, while the supply mainly came from sale openings of exiting projects, resulting in a rise in housing prices.

Apartment prices of a number of completed or soon-to-be-operational projects in downtown Hanoi rose by three to five percent against the previous year. Statistics of the municipal Department of Construction revealed that prices of high-end apartments in downtown districts increased by one to two percent.

In HCM City, the prices of the affordable segment in the suburbs remained stable, while those of the high-end segment rose by up to 15 percent compared with the same period in 2014, according to HCM City Real Estate Association.

However, transactions remained flat recently in the two major cities that had the largest housing supplies.

Reductions in property inventories also slowed down in the first half of this year as a number of stockpiles were in areas far from downtown areas, along with infrastructure shortage. The ministry’s statistics showed that the value of the property stockpile dropped 13.4 trillion VND (599 million USD) during the past six months, bringing the value of the inventories to touch 37.5 trillion VND as of the end of June, which was 1.93 trillion VND lower than the same period last year.

Against this backdrop, the Ministry of Construction recently asked the two cities to reassess housing demand before approving housing development projects to ensure a balance in supply and demand and to stabilise the market.

In another effort to ensure the supply-demand balance, the Ministry of Construction asked localities to promptly draw up housing development plans in line with the Housing Law, which would serve as a basis for licensing housing projects. 

Tran Du Lich, Deputy Head of HCM City’s National Assembly Deputy Delegation, said the government should take land prices into consideration. Land prices were too high, which discouraged developers to invest in social housing projects. In addition, housing development must be in line with infrastructure development, Lich said.

Although a number of experts have in recent months decried the possibility of a “property bubble’ in the making, attention must be given to potential imbalanced development.

The property market is still haunted by the property bubble that burst and pushed the market into a stagnant period that lasted nearly a decade. The market did not start to see recovery till late 2014.-VNA