Real estate market is ‘fragile’, could lead to another bubble, experts say

12:22 | 23/05/2018

Land fever in Phu Quoc, Long An, Nhon Trach and HCM City, a lack of houses for low income earners, and an oversupply of high-end apartments are the main features of today’s real estate market.

real estate market is fragile could lead to another bubble experts say
The real estate market has warmed up

Investors continue pouring money into the high-end apartment market segment, even though there is a sufficient supply. With the selling price of VND45 million per square meter at minimum, the number of target customers is not high.

By the end of the first quarter of 2017, nearly 30,000 apartments of this kind had been marketed in the eastern part of HCM City alone. Buyers from Hanoi could partially ease the oversupply, but it is still not enough.

There is no official report about the number of apartments sold to those who have real demand for apartments. However, the figure is estimated at roughly 30 percent.

Analysts warn that the high GDP growth rate may lead to a ‘real estate bubble’ like the one in 2007 and 2010. The bubble was created by a high GDP growth rate and loose credit policy.

According to the National Finance Supervision Council (NFSC), in 2017, the bank loans disbursed for the real estate and construction sector amounted to 15.8 percent of total outstanding loans.

The State Bank of Vietnam (SBV) has tightened real estate credit. However, analysts doubt that its instruction will cause commercial banks to shrink back and tighten lending to the real estate sector.

The government in early 2018 showed its determination to obtain a GDP growth rate of 6.5-6.7 percent this year.

Analysts warn that the high GDP growth rate may lead to a ‘real estate bubble’ like the one in 2007 and 2010. The bubble was created by a high GDP growth rate and loose credit policy.

GDP in 2007 grew sharply by 8.48 percent, while HCM City gained an impressive 12.6 percent growth rate, the highest level in 10 years.

Currently, real estate credit accounts for 10.8 percent of total outstanding loans in HCM City.

Total outstanding loans in the city were VND1,750 trillion by the end of 2017, with real estate loans of VND198 trillion. The figure would be even higher if counting lending marked as ‘consumer loans’.

Nguyen Van Duc, deputy director of Dat Lanh Real Estate, said the real estate market is ‘fragile’.

Negative signs in the market appeared after the fire at Carina apartment block. After the accident, speculators rushed to sell products. However, despite the price decreases, there have been few transactions.

US$1=VND22,000

Copyright by https://www.vir.com.vn/