Experts advise real estate investment in the context of high inflation to “not die on the pile of assets”

That is the opinion of Dr. Su Ngoc Khuong, Senior Director of Savills Vietnam.

According to this expert, real estate has always been evaluated as a shelter channel to help reduce risks when the inflation rate is high. Even so, large bursts of inflation can also stifle economic growth and reduce demand for real estate to rent or buy.

An analysis by Savills World Research has shown that if inflation occurs due to economic growth (demand-pull inflation), the demand for real estate will be pushed up and help increase the value of real estate. However, if inflation is driven by costs such as raw materials, rising labor costs (cost-push inflation) will lead to a constraint on the supply of real estate. Cost-push inflation is also difficult to predict, often due to unforeseen events such as the environment, geopolitics, etc.

According to Mr. Khuong, in the face of fluctuations such as wars, epidemics, and financial crisis, there are three major asset havens, namely oil, precious metals and real estate. When the inflation rate tends to increase due to uncertainties about war, world economy – politics, financial investment in real estate is considered a solution to help preserve capital flows against risks. This helps them preserve the value of their assets, while avoiding instability in other investment channels.

In particular, in Vietnam, in recent years, the supply of residential real estate is very limited. People mainly invest in land, while residential real estate products including land and properties on land account for a lower proportion. Therefore, Dr. Khuong said that, in the context of world economic and political instability, rapid inflation and tight supply, the real estate market includes both residential and commercial segments in Vietnam. is assessed to increase significantly in the near future and is an investment channel to help reduce risks in the context of inflation.

  Experts advise real estate investment in the context of high inflation to

However, the senior director of Savills also emphasized that when inflation occurs, although real estate prices increase, the market cannot afford to buy, there is no liquidity. At the same time, many investors also use financial leverage to invest in real estate, making low-liquid assets a great burden for them as well as putting pressure on the banking system.

“That’s why, I think that in today’s complicated context, it is especially important to consider carefully when using financial leverage to invest in real estate, to avoid repeating the “dead on” situation. pile of assets” has happened in the past.In the next 9-12 months, it is entirely possible that some investors will be forced to sell off assets because they cannot bear the pressure from financial support tools. However, the speculative nature of this group is not large, it is difficult to manipulate the market, affecting the price level”, emphasized Dr. Khuong.

Besides, the supply of housing in Vietnam in the coming time is still very limited, so a reduction in real estate prices is very unlikely.

Analyzing more about this point of view, Mr. Khuong said that looking at the history of the first crisis of the world economy in 1917, which originated in the US until now, there has been almost only one crisis that caused real estate prices to fall. was in 2007-2008 with a decrease of 30-40%.

Particularly in Vietnam, although from 1975 to now, the economy has also experienced a number of events such as the crisis of 1997-1998, 2007-2008, 2011-2012 and most recently the period of 2020-2021. In the period 2011-2012, real estate prices in the whole market decreased by 30% because investors used too much financial leverage at that time. The rest, the fact shows that after each economic crisis, real estate prices increase.

That is why, Dr. Su Ngoc Khuong recommends: “For investors, before deciding to put money down, it is necessary to pay attention to the price and legality of real estate. For investors who intend to sell real estate at this time. , it is necessary to carefully consider the purpose of using the money after the sale of that property.It is reasonable if this money is invested in more effective investment channels in the context of the epidemic, international political instability. “.

From a macro perspective, Dr. Khuong noted that the excessively high real estate prices also affect the attractiveness of foreign investment in expanding production and business activities in Vietnam. With inflation, the commercial real estate segment also has to push up service prices, while the ability of businesses to pay is still limited after the Covid-19 pandemic. chn

According to Ha Vy

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