Why do real estate prices keep increasing?

Experts and investors believe that all real estate segments will continue to increase in price in the near future, but the liquidity is low.

The average price of Grade C apartments in Ho Chi Minh City is now approaching the mark of 60 million VND/m2, while the business premises on Nguyen Hue Street (District 1) have also been raised from 22 million VND/month for an area of 40 m2 in January increased to 30 million VND/month for an apartment of only 25 m2.

Meanwhile, in the past half year, land prices in Long An, Dak Nong, Binh Phuoc... have increased by more than 30%. Even a villa in Dong Nai increased by 20% in less than 2 months.

Real estate prices surged everywhere, in all segments. The current factors of inflation and epidemics push real estate prices even higher.

The forces of the market

At the recent seminar "Decoding the land fever", Mr. Vo Huynh Tuan Kiet, Director of CBRE Vietnam's Housing Marketing Department assessed that, if in the period of 2018-2019, land prices would only increase in some areas in Vietnam. Ho Chi Minh City like District 9, Thu Duc relies on big projects, then in the past 2 years, this development has appeared and spread across the country.

Real estate prices increased sharply in many localities, across many segments

Mr. Kiet explained that the Vietnamese economy, despite being affected by Covid-19, still has a relatively good growth rate. Information on regional and local planning, deployment of infrastructure connectivity was also published, while many foreign enterprises developed industrial parks and resort projects... leading to a forward-thinking investment mentality, pushing forward Real estate prices go up.

On the other hand, in the context of high inflation, investors have a need to find an asset anchoring channel, and real estate is one of the safest and most effective channels. Real estate expert Phan Cong Chanh recognizes that the domestic cash flow is abundant, especially many stock investors with an increase of 2-4 times profits in the past year are tending to switch to real estate investment to invest in real estate. limit risks.

Meanwhile, the supply in big cities like Hanoi and Ho Chi Minh City "almost reached the threshold", while other localities are also strict with investors. Lack of supply causes land prices to increase, especially in emerging localities.

"Not to mention, the recent Thu Thiem land auction event was considered as an epicenter, having the power to push the overall price of real estate up," added expert Phan Cong Chanh.

Mr. Le Quoc Kien (HCMC) said that for business people, the average profit is usually about 15-18%/year on invested capital.

"With high inflation, rapid increase in input material prices while selling prices have not kept pace, combined with a decline in consumer demand, will discourage businesses and push money into asset accumulation. ", he said.

He is also personally investing in townhouses, houses for rent, suburban land and provincial land. He said that if there is no debt pressure, banks will not sell unless they get a good price, because when selling, they have to find another place to buy, unable to keep cash in the current inflationary time. The supply will come more from people who use bank leverage and no longer have enough cash flow to close the bank.

"Everybody owns property, but no one has money"

Forecasting in the next 1-2 years, Mr. Kien believes that real estate prices will continue to stay high, because for individual investors, the more inflation, the more they increase the selling price to prevent price slippage.

When the whole market has this mentality, a new price level is automatically established, the valuation base of appraisal units and banks also increases.

"Real estate projects formed in the future when opening for sale also pre-calculate the future price of 2-3 years after handing over the product, and they certainly also include inflation in this price. push the current price of the entire region up," the veteran investor acknowledged.

Mr. Vo Huynh Tuan Kiet also assessed that 2022 will be the pivotal year for the next stage of economic development, after the disturbances caused by the recent epidemic. Therefore, real estate prices will continue to increase, but the speed of the increase will depend on the absorption capacity and acceptance of the market. Supply in 2022-2023 will also recover, creating momentum for the coming time.

However, according to Dr. Su Ngoc Khuong, Senior Director of Savills Vietnam, when inflation occurs, although real estate prices increase, the market cannot afford to buy, and 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.

Mr. Le Quoc Kien also affirmed that current real estate transactions are very slow in liquidity. "Sellers add the price slippage, infrastructure development and profit to the property value, buyers expect the price to decrease and wait to buy at 5-10% lower or equal to the second quarter of 2021." Mr. Kien analyzed.

Sellers keep prices high, while buyers lack capital, creating tension in the real estate market

According to Mr. Kien's observation, most investors have put money to buy real estate since mid-2020. In 2021, the epidemic situation affects production and business while inflation risks increase. Infrastructure development appeared a lot, so investors not only did not "sell out" but also continued to buy more.

Therefore, except for those who have taken profits and continued to reinvest, at this time, he thinks that most investors have entered the period of running out of money, and bank loans are almost "out of room". That's when the paradox appeared: "Everyone owns property, but no one has money".

Therefore, according to his investment point of view, those who can "hug" assets for 3-5 years will push capital flows from high places where they have taken profits to low-priced areas with low prices, with the expectation of multiplying many times the value. assets as of the period 2016-2021.

And investors with thin capital only "hugging" for 1-2 years, even less than 1 year, will gradually return to the area near the center, with less profit but more liquidity to prevent risks.

Expert Phan Cong Chanh also believes that investment portfolios should be diversified in this context. In addition to focusing on real housing needs with the segment of mid-priced apartments, low-cost housing or suburban land, provincial land, investors can target resort real estate projects. in developing markets such as Quy Nhon, Phan Thiet... with low prices, high growth potential.

By Zing News