If inflation occurs, real estate prices will increase but “freeze” trading?

Right in the first months of the year, the pressure control inflation in Vietnam has become an important issue raised in macroeconomic management. Data from the General Statistics Office (Ministry of Planning and Investment) shows that, on average, in the first two months of this year, CPI increased by 1.68% over the same period last year, core inflation increased by 0.67%.

According to analysis by economic experts, 3 main reasons for inflation this year include a sudden increase in aggregate demand during the period when the economy recovers from the pandemic; the dependence of the Vietnamese economy on imported raw materials; and disruption of global supply chains.

This year, Vietnam sets the CPI target to increase by about 4%. At the time of January, this goal was judged to be completely within reach. However, after the sudden fluctuations of the world economic – political situation, this goal became a big pressure.

Real estate prices in many places have increased rapidly in recent years (Photo: Dan Tri).

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 increases this year, the pressure to increase real estate prices will also be great.

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 Dr. Su Ngoc Khuong – Senior Director of Savills Vietnam – 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, and at the same time avoids instability in other investment channels,” said Khuong.

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, 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.

However, the senior director of Savills Vietnam also emphasized, 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.

Sharing the same view, many professional real estate investors also recognize that real estate investment planning calculations at this time are absolutely necessary because this year, inflationary pressure on the economy will increase. very big.

“When investing in real estate during inflation, the bank interest rate increases sharply, investors need to consider whether the cash flow from real estate investment is enough to pay for the loan interest. Or Is that real estate liquid to collect cash flow when needed?”, a real estate investor in Hanoi shared.

From the perspective of the whole market, Mr. Nguyen Van Dinh – Chairman of the Vietnam Real Estate Brokers Association – said that from the beginning of 2022, although the epidemic situation was still complicated, the market was excited everywhere. regions, real estate transactions are still quite active, businesses are also very excited. However, in the long term, we will still face many crises, with inflation pushing up real estate prices, so real estate in 2022 will be quite harsh.

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