Inflationary risks clouding thirst of residence investors

April 01, 2022 | 09:19
Despite being considered as an alternative investment channel to help reduce risks in the context of inflation, the residence market’s liquidity in the first quarter was reported at a low level.
Inflationary risks clouding thirst of residence investors
Many investors are interested in new activities, but the current situation is not always ideal for them, Le Toan

Land prices have increased 2-3 times in just one year. However, the high price also caused the low liquidity because many people could not afford to buy, especially end-users.

Nguyen Van Hai, an investor in Ho Chi Minh City, said that land prices have increased by about 30-50 per cent, and even doubled in Ho Chi Minh City’s districts and outskirts areas compared to last year.

“With this increase, the investors would have a high profit if they could sell their assets. However, the number of successful transactions is at a low. The real situation now is that many are window shopping but fewer people are parting with their cash,” Hai said.

Many investors have been prevented from buying land during a feverish time, while the development of infrastructure and services has not developed.

The high price of real estate and reduction of requests have discouraged project investors who planned to launch their projects this year. In fact, some developers have offered their products at double the price compared to last year; however, interested buyers are few.

That is according to Su Ngoc Khuong, senior director of Savills Vietnam, who added that both the residential and commercial segments in Vietnam are assessed to increase significantly in the coming time, and are an investment channel to help reduce risks in the context of growing inflation.

“However, when inflation occurs, although real estate prices increase, the buyers cannot afford them and there is no liquidity. At the same time, many investors also use financial leverage to mobilise capital, and this is a high risk for them because those assets could become a big burden for them as well as put pressure on the banking system,” emphasised Khuong.

In the next 9-12 months, Khuong expects that investors who cannot afford loans will have to sell off their assets. However, the number of these investors would not be high, so it may not impact the whole market.

Besides that, the supply of housing in Vietnam is still limited, so a reduction in real estate prices is unlikely. “For investors, before deciding to invest, it is necessary to double-check the price and legality of their proposed assets. For investors who intend to sell assets at this time, it is necessary to carefully consider the purpose of using the money after the sale of that property, to choose a more suitable channel,” Khuong said.

Some real estate insiders asserted that the recent increasing price of real estate was caused by many investors transferring profits from stock to the real estate market.

In the first quarter of this year, real estate prices increased in most areas, from Ho Chi Minh City to other neighbouring provinces such as Binh Duong, Dong Nai, Binh Phuoc, and Tay Ninh to more distant provinces such as Lam Dong and Dak Lak.

Real estate expert Phan Cong Chanh said that there is a close connection between real estate and the stock market. “During 2020-2021, the VN-Index continuously broke records in terms of index and liquidity. Besides, new investors entering the market also make the market even more exciting. Vietnam’s stock market is in transition from an emerging to a frontier market. Therefore, some stock investors are collecting their profits and transferring them to real estate,” Chanh said.

By Quynh Chau

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