Property rally on last legs: experts

A view of HCM City’s District 2 where land and housing prices have been surging thanks to the rapid development of infrastructure.-VNA/VNS Photo Hoàng Hải

Analysts warned the prices have risen unrealistically while demand is low, and expected them to gradually subside later this year.

According to real estate company Danh Khôi Á Châu (DKRA), superb infrastructure in the east of the city in the form of the Sài Gòn River Tunnel, the Thủ Thiêm bridge, the expansion of the Hà Nội Highway, and the metro route No 1 have caused land prices in District 2 and 9 to surge by five to 10 times in the last few years.

For example, in 2006 a square metre of land in An Phú-An Khánh Ward, District 2, cost VNĐ8-20 million (US$350-880). Now the same land costs VNĐ66-155 million ($2,900-6,825).

Land prices in Thủ Thiêm have skyrocketed from VNĐ9-12 million to VNĐ102-155 million.

In District 9, around 15 km from downtown, prices have increased three to five times in 10 years from VNĐ3-6 million to VNĐ18.5-32 million.

The housing market has also strengthened thanks to the development of infrastructure.

Real estate consultancy firm Jones Lang Lasalle said that in 2012-16 around 37,000 apartments were offered in the east, mainly along the under-construction metro line.

It expects another 40,200 to hit the market between now and 2020.

The western part of the city has also seen housing projects mushroom.

In 2015 the west only accounted for 18 per cent of the apartments to enter the market. But the number surged to 25 per cent last year and 35 per cent in the last quarter.

DKRA said the rapid growth in supply in the last three years, especially in 2015-16, have negatively impacted the market.

One of the fallouts has been the sharp rise in land prices. The company said prices have kept rising though demand has not been high, and this would affect the market’s stability and scare buyers away.

Trần Khánh Quang, general director of Việt An Hòa Company, told Sài Gòn Tiếp Thị (Sài Gòn Marketing) newspaper that property prices plunged 40-50 percent from their peak in 2007 but have bounced back strongly in the last two years, and are even higher than in 2007.

In around two months this upward trend would end, and the market would adjust in accordance with real demand.

Lê Hữu Nghĩa, director of property developer Lê Thành, said this is likely to be the “last wave … in this cycle.”

Demand is decreasing and the main buyers are speculators, and prices would eventually cool off, he added.

Dương Thùy Dung of CBRE Việt Nam said the apartment market would continue to grow this year though at a slower pace than in 2016.

She expected that from next year the market would see higher oversupply levels and lower prices.