Experts: realty bubble on horizon

The rapid increase in demand and market price of the property sector in Vietnam has sparked concerns of a 2017 real estate bubble.

With oversupply a concern, experts have raised concerns of a real estate bubble forming in 2017-illustration photo

According to Dang Hung Vo, former Deputy Minister of Natural Resources and Environment, a real estate bubble  may be seen next year.

Vo said that a property bubble usually happens when all financial sources are focussed solely on the real estate market, which pushes the price up by 30 to 40 per cent, and when more than half the buyers are speculators.

“The real estate market bubble did not happen in 2016, but I expect the market will bubble in 2017. Therefore, the local authorities should have different solutions to deal with it when the prices of real estate increase and large numbers of units are in stockpile,” Vo said.

He also predicted that the resort and second-home segment will strongly develop in 2017, which will attract a range of developers and increase demand in this segment.

The office leasing segment, he said, still has a good balance between supply and demand; therefore, it won’t experience noteworthy changes in 2017.

Meanwhile, the retail property segment will face some challenges, with more and more supply entering the market, creating oversupply conditions.

Meanwhile, economist Dinh The Hien predicted the feared downturn for the end of 2017.

“Around 40,000 units will be launched in 2017 and 2018. This figure will create oversupply and cause a price downturn,” Hien said.

In the last quarter of 2016, the Ho Chi Minh City Real Estate Association reported on an oversupply of high-end units in the market.

Previously, high-end apartments were primarily located in districts 2 and 7. In 2016, they centred on the two sides of the Saigon River. It is estimated that more than 20,000 units are being built on the road from Nguyen Huu Canh to Ben Van Don, a section of the Saigon riverside.

These units are creating fierce competition, but it is uncertain if they will compete well in the near future, Hien Said.

On the other hand, experts confirmed that 2017 will become a milestone year for mid-end and affordable residential unit growth.

The mid-end and affordable segment has attracted many big developers, such as Vingroup, Muong Thanh, and Viet Hung Urban Development Company. There will be thousands of affordable houses entering the market in the next three years.

Many developers who have not benefited from the high-end segment have moved to the affordable housing sector, such as Him Lam, Nam Long, Hung Thinh, Dream Home, and several foreign developers and investors.

According to figures from the Ministry of Construction, during 2011-2015, there were more than 200,000 units in stockpile.

The country now has more than 4,000 projects which will provide more than three million units.

Many investors and buyers have used loans to buy their properties, and plan to re-sell to the market.

According to CBRE Vietnam, more than 40 per cent of the buyers now are speculators. This figure was 70 per cent in 2007, when the housing bubble occurred.

By Bich Ngoc