Fast urban development and young population, especially in big cities like HCMC and Hanoi, are among elements making the country a promising destination for not only local property development companies but also foreign ones. Huge housing demand is still offering ample business opportunities for developers and investors as well, although the market is struggling to escape from the downturn happened some two years ago.
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| Some condo buildings developed near a large land lot project in HCMC’s District 2. |
Property prices will continue uptrend
Speaking at a recent seminar held in the capital city of Hanoi, Vu Xuan Thien, deputy head of Housing and Market Management Department under the Ministry of Construction, projected that the local property market would see its strong development in the next ten years given a huge housing demand in big cities. However, alongside the market development, the property price will continue to go on its upward trend, not to slide down as many homebuyers expected.
Thien attributed the housing price uptrend to new regulations that would drive up the input costs for developers. These include a higher land use fee calculated on the market price of land, forcing property developers to raise prices of for their properties.
Nguyen Van Minh, general secretary of Vietnam Real Estate Association, echoed Thien’s ideas, saying that the Government would petition the National Assembly in 2012 to modify the current Land Law by recognizing the market price. Some decrees have been translated into reality with a policy to collect land use fee following market prices.
The property sector has been seen as a safer investment channel for investors as many investors in recent years have preferred properties to gold or stock investments.
Commenting on the trend, Nguyen Trung Vu, general director of Century Real Estate JSC, said property was one among the three investment channels including gold and stock sectors which are linked together in the market. While gold and share markets have shown their unpredictable risks, the property sector has been seen as a safer channel for investment. That was why there were many individual investors ready to risk their money into the market.
He, however, pointed to another element contributing to the housing price uptrend, saying that while the market saw abundant housing supply in HCMC, the picture in the capital city of Hanoi was somewhat different as many buyers were still ready to buy properties for a certain profit margin given limited supply, pushing up housing price in Hanoi market to the sky.
Some experts projected that the property market would be more positive in 2011, but it could hardly create waves for investors to surf on as seen in the first quarter of this year.
Looking for a transparent market
Compared with the HCMC market, the Hanoi market is less transparent as the housing supply falls behind demand. Some say that the market in Hanoi will be as transparent as in HCMC when it sees the housing supply increased.
Tong Van Nga, vice chairman of the Vietnam Real Estate Association, said that the market could not be transparent as long as supply still falls short of demand, with many trading transactions made under the table.
Nga said property trading regulations did not provide for property developers to sell their apartments until they finished the foundation of their projects. However, many of them mobilized funds via different forms, including capital contribution contracts, to offer buyers a right to buy a property at a softer price.
Many people are now waiting to see how the newly issued Decree 71 will be implemented to make the market more transparent as its regulations require property developers to make public their business activities, including their project information and their capital mobilization from investors.