PROPERTY INVENTORIES FALL, WORRIES STILL LOOM

The total value of real estate inventories in the country decreased sharply to about VND27,894 billion by the end of May 2017, according to the statistics of the Bureau of Housing and Real Estate Market Management under the Ministry of Construction. Although inventories tend to go down, forecasted rising supply is fuelling up market concerns.

According to the Bureau of Housing and Real Estate Market Management, compared with the end of 2015, the value of property inventories at the end of 2016, in April 2017 and late May 2017 dropped VND22,995 billion (over 45 per cent), VND3,129 billion (10.09 per cent) and VND474 billion, respectively.

Midmarket segment accounted for the largest share of real estate inventories with VND13,203 billion, equivalent to 3,375,871 square metres, followed by low-rise building segment with VND7,379 billion (equivalent to 3,492 units), apartment segment with VND4,832 billion (3,825 units) and commercial land segment with VND2,480 billion (648,139 square metres).

Inventory value in Hanoi is still higher than that of Ho Chi Minh City. The former had VND5,451 billion as of the end of May 2017, down VND23 billion from the previous month, and the latter had VND5,183 billion, down VND100 billion from April.

According to the Bureau of Housing and Real Estate Market Management, real estate inventories would continue to decline but the pace would be slowing. Residential lands far from downtowns are not attractive because of their incomplete infrastructure. Strong supplies in the coming time will likely push up real estate inventories quickly, according to specialists.

According to property businesses, in the coming time, the supply will increase sharply compared to the market demand, especially for high-end apartment segment being overproduced.

Mr Nguyen Tran Nam, Chairman of the Vietnam Real Estate Association, said that loan of the real estate market is safe, in consideration of big investors. But, in overall, it still bears risks. Therefore, it is necessary to adjust credit flows among segments to disperse risks.

In addition, he said that many developed countries have raised capital for real estate through investment funds in addition to credits from banks. These funds invest only 10 per cent in growing projects and 90 per cent in projects built for rent and profitability is also a safety factor. This is a very good channel that needs to be considered carefully for use in Vietnam.

Price of construction materials also affected market liquidity. The rapid-rising prices of construction materials may lead to property price hikes, resulting in weaker purchasing power of the market. Therefore, developers must consider selling at high prices to ensure repayments for banks and profitability.

Professor Dang Hung Vo, Former Vice Minister of Natural Resources and Environment, noted that, in the current inventory structure, some products have almost no liquidity because of poor traffic connectivity and incomplete essential infrastructures.

According to experts, real estate businesses should refer to data released by authorities, business associations or real estate consultants to have proper, effective investment strategies to avoid potential risks.

Source: VCCI