A local bubble appeared in real estate

A market report of the Vietnam Association of Realtors (VARS) said that in the first months of the year, many provinces and cities across the country recorded localized land fever, especially virtual fever occurring in a number of localities with infrastructure planning information such as airports, industrial parks, bridges and roads.

Rising house prices but low liquidity is a signal that a local bubble has appeared. Notably, house prices also escalated according to land prices and established new price levels in many places, but the transaction volume was only low. To keep the market stable, State management agencies are focusing strongly on strengthening the legal corridor.

In the first 4 months of the year, many localities such as Ha Tinh, Binh Phuoc, Gia Lai, Ho Chi Minh City, Hanoi and neighboring provinces experienced a sudden real estate price fever. The price of land plots in many rural districts increased by 2-3 times over the same period, in some places the price increased by 30-50% in just one quarter. The asking price of new projects in Ho Chi Minh City recorded an increase of 30-40% compared to the old price level.

On online real estate exchanges, land prices in the North including Hai Phong, Bac Giang, Quang Ninh, Bac Ninh, and Hanoi increased by 20-35%. Land prices in the Central region of Binh Thuan, Khanh Hoa and Thanh Hoa provinces increased by 13-40% and in the South, land prices in Long An, Binh Phuoc and Binh Duong increased by 13-27%.

Also concerned about a real estate bubble similar to the warning of VARS, Mr. Huynh Phuoc Nghia, a senior consultant at GIBC, admitted that the phenomenon of land fever, price fever taking place everywhere in the first 4 months of 2022, house prices. New projects jumping to the highest ground in the region is a concern, which can lead to many consequences.

It is a price bubble that weakens market liquidity. Social resources have been poured into housing and real estate, depriving them of development opportunities for investment, business, and production. High land speculation can lead to the scenario died on a pile of possessions when the funding sources lock the credit valve.

Mr. Nghia further analyzed that the real estate bubble appeared all over the city, spreading to the countryside, leading to the implication that farmers ran after these fevers and sold arable land. It is increasingly difficult for wage earners with low average income in society to buy a place to settle down. When the cost of housing is increasing, it can eliminate the opportunity to develop other links of the economy.

GIBC experts are concerned that the real estate price bubble along with the specter of inflation may deepen the death of the housing market, which is easy to sell and difficult to buy and slows down purchasing power. When inflation is forecasted to increase, the more housing prices will increase, the pressure on housing will increase, causing instability in social security.

Mr. Tran Khanh Quang, General Director of Viet An Hoa Company, forecast that in the past 4 months, the real estate bubble will not only appear in big cities but also spread to rural areas and small provinces, which may lead to the trend of land speculation. Land and property is becoming more and more powerful. When property speculation accounts for a high proportion in the market, it will lead to an uncontrollable increase in housing prices, which is detrimental to the economy.

According to Mr. Quang, the price bubble appears along with the risk of rising inflation, property holders will calculate the slippage rate into the selling price of real estate, which further fuels the price fever. Therefore, in the medium term, the housing market may be under pressure of decline and unsustainable development.

“Investors need to carefully review their investment portfolio and control cash flow when signs of a real estate bubble begin to appear more and more,” Mr. Quang advised.

Vu Le