How does real estate react when inflation is high?
In the context of high inflation concerns, which channel to invest in is a headache for many investors. With the real estate channel, experts say that if inflation rises high in 2022, the pressure to increase real estate prices will also be huge.
From the second quarter of 2022 onwards, when the economy recovers and Vietnam completes the goal of universal vaccination for children, real estate prices will increase even more. Meanwhile, demand increases but supply has not recovered, the price increase is obvious.
Inflation is like a reference level related to the increase in the price of goods on a daily basis. Those materials are used to build houses. If the prices of things like wood, bricks, cement, sand, gravel, etc. and equipment go up, the construction company or the seller will solve the problem by increasing the selling price of the house.
In this context, many people do not want to keep cash but tend to move into assets. In which, real estate is considered as a safe haven, preventing price slippage. But will real estate prices definitely increase when inflation is high and liquidity at that time still good?
Nguyen Van Dinh, Chairman of the Vietnam Association of Realtors and Realtors (VARS), said that from the beginning of 2022, although the epidemic was still complicated, the market was excited in all regions and transactions. Real estate is still quite active, businesses are also very excited.
However, in the long term, the market will still face many crises, besides regulatory barriers. Specifically, inflation pushes up real estate prices, so the real estate market in 2022 will be quite harsh. In particular, the impact of the war between Russia and Ukraine will add more difficulties to the market.
Meanwhile, Mr. Phan Le Thanh Long, director of the Australian Institute of Chartered Management Accountants (CMA Australia) in Vietnam, gave more specific data to talk about the link between inflation and the real estate market. produce.
Specifically, according to this position, in the period of 2009 – 2010, when the global financial crisis took place, real estate prices increased hotly and there was a phenomenon that money was withdrawn from the securities channel to buy real estate.
Meanwhile, CPI – the index reflecting inflation in Vietnam at this time fell to the lowest level in 6 years. This shows that real estate prices move inversely with inflation.
In the period 2011 – 2013, inflation increased by double digits and reached the strongest increase in 10 years, culminating in CPI in 2011 increasing by 18.75% compared to 2010. Deposit interest fluctuated 18.5 -21.5% and loan interest up to 25-30%.
Bad debts at banks skyrocketed, in which bad debts in real estate accounted for a large proportion. The market was in a frozen state and housing prices plummeted.
Real estate buyers need to take into account the factors that actually increase prices, but inflation is not the cause of rising prices, even high inflation causes interest rates to rise, a tight currency is the enemy of real estate, causing real estate to freeze, reduce prices.
Long cited, a luxury apartment in the center of Hanoi has a secondary selling price of 2,000 USD (equivalent to 35 million VND/m2), the resale price after a year is only 25-28 million VND/m2. A lot of people are stuck in real estate right now.
The most recent period was last year, when many people thought that the sharp increase in real estate prices led to high inflation. While in fact, CPI only increased by 1.47%, ie inflation was at a very low level.
From the above analysis, he said that there has not been any data showing a positive correlation between inflation and real estate prices.
“Real estate buyers need to take into account the real increase in price factors, but inflation is not the cause of rising prices, even high inflation that causes interest rates to rise, a tight currency is the enemy of real estate. , causing real estate to freeze and reduce prices,” said Mr. Long.
Sharing the same view, Mr. Pham Anh Khoi, General Director of Real Estate Financial Services Company (FINA), real estate has a correlation with inflation, once inflation increases, real estate prices often tend to the upward trend, because this is considered a safe haven for investors.
“Investors who think that inflation will increase in the near future, they will be more interested in protective properties and real estate is one of the channels that are receiving a lot of attention in Vietnam. the present time,” said Mr. Khoi.
However, according to the CEO of FINA, when diving into different times and different inflation levels, there are two types of inflation that investors should be concerned about.
One is expected inflation, the above answer is correct, real estate will increase. Second, inflation that exceeds expectations too much will lead to different chain reactions, negatively affecting real estate.
“My experience shows that there are periods when inflation exceeds expectations too much and real estate does not increase or even decline. Therefore, investors must be careful and strategic, prepare for that. “, emphasized Mr. Khoi.
Mr. Dao Phuc Tuong, CFA – Financial expert also warned that real estate is starting to reach the stage where investors have to be much more careful with the market’s price base and liquidity. Especially in the near future interest rates may increase.
Besides, if looking at the macro perspective, when inflation is higher than the scenario many people suggest (below 4%) to the extent that the State Bank has to adjust its policy, this will be dangerous for investors. short-term investment.
at Blogtuan.info – Source: cafebiz.vn – Read the original article here
