Real estate market to warm up at year's end

VNRE - The evolution of the Vietnamese real estate market in the first half of this year and gloomy forecast for the remaining months have frustrated many investors and brokers.

However, as an experienced expert and manager in this sensitive market, Mr Vu Xuan Thien, Deputy Director of Housing and Real Estate Management Department under the Ministry of Construction, predicted that the currently fluctuating market will warm up toward the end of the year.

Mr Thien said the real estate market in the first six months of this year was complex and volatile. Especially since April 2010 when margin gold trading floors were closed by authorities’ orders and declining credit interest rates, the property also slumped.

In fact, the real estate market in the first half of the year was pregnant with factors of instability, the supply was relatively abundant but most products were unaffordable for a majority of people.

In addition, speculative, price-blowing activities and psychological investments caused some abnormal fevers, especially those happening in the west and north of Hanoi. In some areas in the capital city, the price climbed 40 percent in April in compared with the same period of 2009.

Why did price-driving activities and herd-oriented investments cause the sudden freezing in recent months?

There are many causes for the market slump. I think the market is ‘stopped”, not plunged. Prices of many segments do not reduce much.

The market witnessed a price-blowing movement which caused a price surge. But, when the authorities probed the cause for the unusual surge, investors started to weigh up their investment decisions.

Furthermore, the Government’s Decree 71 is proven to support the people; thus, many have decided to wait for new instructions from the authorities. When the instructive circular is issued, the market will recover.

But, why did the market slow down? Why did the price remain high although the market also had very few deals?

In fact, prices have also slowed down. In general, prices in many places were not as high as in times of fevers. The price still stays high in business districts as the demand exceeds the supply.

Prices in suburbs are not high but they have not returned to real prices.

What makes real prices? Where should they be?

In fact, prices are regulated by the market. Prices are real if they are not the outcome of bubbles or rumours. Price rates are made by the market as they depend on the point of time, location and demand.

In general, prices have close-knit relations with the supply, which is quite abundant at the moment. However, a majority of customers are unaffordable to real estate prices.

It is said that bad investor behaviours are caused by improper management and sanctions on violated transactions. Besides, the people know too little about buying, selling and project information. What do you think about this?

There are no light-handed sanctions. In fact, everything has its own roadmap and the process of awareness changes. Previously, management bodies did not directly instruct and control on-floor transactions. After the Decree 71 takes effect, this shortcoming will be remedied.

In the coming time, we will classify real estate trading floors. There will be circulars to classify trading floors into the first class, second class and third class. The unclassified ones will be common trading floors. As regards information, we regularly update on related trading floors and on the Ministry of Construction’s website.

However, keep the information more updated and accessible for the people, we will release reports and evaluations on market in specific periods. The Ministry of Construction has assigned the Housing and Real Estate Market Management Department to work with the Construction Economy Institute to make such reports.

The Housing and Real Estate Market Management Department has been established for a relatively long time and has issued many management policies. So, why is the real estate market considered sensitive and non-transparent?

Actually, the real estate market is always sensitive worldwide because it leaves a huge impact on the economy of each country as well as each locality. Therefore, the decrease or increase in property prices will largely impact the economy and society.

Most of world economic recessions were rooted from the real estate market. The stabilisation of real estate market is extremely important but very difficult.

Besides, the transparent use of capital in the real estate market is of concerns because this is a favourable place for money laundering. In the coming time, we will organise seminars on money laundering in real estate.

The information is still available but people still prefer purchasing on herd psychology and rumours, making information confused.

If investors buy or sell on trading floors, the market will be soon transparent. But, as I said, many companies do not need to bring their products on trading floors to sell. Of course, mechanisms and policies need to the time to come to life.

Source: VCCI