Looking beyond the generally held property myths

Do you think that Vietnamese market has a 10-year bubble cycle?

Yes, many experts in Vietnam assumed that the market has a bubble cycle. However, I think that price fluctuations over the past years proved that its so-called  10-year cycle is not right.

Specifically, Vietnam’s property market witnessed the first land price fever in 1991-1992 and the second in 2001-2002 and 2003 and the third during 2006-2007 till 2008’s early fourth quarter. Then, from 2008’s late fourth quarter to now, the market went down. Hence, the Vietnamese real estate market has no cycles.

How does the value of land and houses change in Vietnam?

Vietnam is a different case to many other countries. For a long time, the property in Vietnam was considered as the safest way to invest. As a result, many people thought that investments in property only made big profits.

I think that this outlook is erroneous. The real estate grew-up, but unconnected with the hard life at the time. Therefore, the commercial transaction was very low. This is tragedy of Vietnam’s real estate market.  Due to big profits, developers had a tendency to ask for as much land as possible to build accommodation, then sell for profits.

This trend led to developers having little concern for a  product’s investment cost and price.
The consequences is a large over-supply and the developers had to gloss over the situation by slogan “high value, cheap price” in order to attract buyers.
 
Currently, developers are focusing on attracting buyers by slashing prices, but buyers have not taken the bait. Why?  

In Vietnam, I am sure real estate investment capital is mainly commercial loans with high interest rates. That means scores of investors mobilise capital to invest in property. For example, investors accept the loan with high interest rates, high construction material costs and costly construction technologies. All make the costs increase and lead to hard sell on the market.
But the tragedy is that investors do not take cost into account. Though investors reduced prices, consumers still refuse to buy. The price level seemed still to be unaffordable to buyers. This is, I may say, the failure of the current management system.

As a result, many developers and secondary investors continue reducing product’s prices to cut losses. I think it is a must that they have to do in such a difficult time.  

Do you think that Vietnamese buyers can still reserve money for buying housing accommodation?

I believe that they still have money reserved in their pockets, because a lot of people are still going to find a place that can be lucrative.

For example, all units of Xa La Residential project located in Hanoi’s Ha Dong district were sold out at prices of over VND10 million ($500) per square metre only within one week.

This price seemed not too cheap to many buyers. However, it was rather attractive, a lot of people still bought.

That proves that consumers still keep a huge amount of money, only thing was that we did not encourage the amount of consumers to invest in real estate while we just tried with credit solutions.

In my opinion, we should not find subliminal solutions. Instead, we should seek ways to raise capital from the people or in other words, should keep real buyers to stay. This is the most sustainable and optimal solution.

But how to make people believe and put money into real estate is a long story and business art. I believe anyone who can do this will win.