REAL ESTATE MARKET IN 2017: EXPERT FORECASTS

Although the property market showed strong signs of recovery driven by significantly improved liquidity in 2016, all segments generated growth momentum. Notably, no bubble was seen in the year as warned earlier. Transactions were mainly concluded by end-buyers rather than speculators.

Experts are optimistic about the real estate market in 2017. Specifically, vacation property and non-traditional investment forms will continue to exert a strong pull on retail investors. These forms will attract a large amount of unemployed money from the public as well as overseas remittances. However, retail investors need to improve professionalism in picking up best investment locations, investment projects and investors.
Housing will be still the central segment and catch the greatest interest of the market. This segment is expected to see an upward spiral in 2017 because demand always exceeds supply.

According to experts, the supply can only meet a quarter of demand for affordable housing. This will lead to certain inadequacies of pricing and construction quality. Housing prices in this segment may be pushed up on under-supply.

As for capital sources for the real estate market in 2017, foreign direct investment (FDI) flows are expected to be stronger than in 2016 and FDI for property development will still keep the biggest share. Domestic credit funds for real estate development will remain a main resource and ensure a rise in property supply on to greater investment opportunities. Nevertheless, this source will still be tightly controlled by the State Bank of Vietnam (SBV). Some other sources from overseas Vietnamese (remittances) and from the public will be further stimulated to be channelled into the property market, especially in vacation property segment.
According to Dr Dang Hung Vo, persistent concerns of the property market are always mechanisms, policies and laws. The Government and the National Assembly need greater determinations and efforts to make and amend laws and ensure the publicity and transparency of real estate information. This will be a prerequisite to deal with risks in development investment and market development forecast.

2017 real estate market is still prone to risk

Mr Le Hoang Chau, Chairman of the HCM City Real Estate Association
Impacts of the legal system, particularly the Law on Land, the Law on Housing, the Law on Real Estate, the Law on Construction, the Law on Investment, the Law on Credit, the Law on Tax and other legal documents are heavy on the property market. The legal system, which is being completed, will affect economic development, including the property market.

Besides, objective factors such as the uncertainty of the Trans-Pacific Partnership (TPP) and China’s attitude towards the Regional Comprehensive Economic Partnership (RCEP) will have direct impacts on investment flows in Vietnam and will directly affect the real estate market in the medium and long terms.

Inherent inadequacies of the property market such as supply and demand imbalances in the premium segment and the fact that some big companies hold huge amount of funds and successfully mobilise from society are posing potential risks to the property market.

House prices are unlikely to fall further

Mr Lai Van Tu, Director of Phuc Ha Real Estate Exchange
In 2017, customers will benefit more when investors place a greater emphasis on the quality of products. However, house prices are unlikely to fall further because the profit margin is now not big after a long period of lacklustre market performance and price slumps.

Price drops will largely depend on various reasons. If land prices do not go down, housing prices will be unlikely to decline. At present, most investors have to borrow money from banks and prices are unlikely to change unless interest rates fall. Prices of construction materials like cement and steel will affect housing prices. Hence, key competitive factors among investors are product quality in addition to location advantage.

There will be pricing competition

Mr Nguyen Quoc Khanh, General Director and President of DTJ Investment and Distribution Joint Stock Company
Houses priced below VND2 billion will be still the hot pick in 2017. A highly liquid project must gather following factors in combination: Having good infrastructure, situating in populated areas and selling midmarket houses.

In 2017, the supply of affordable housing will be much more diverse than in 2016. Therefore, investors must analyse to shift to the midmarket segment in order to increase their competitiveness on the market. Pricing competition is inevitable among locations and segments.

Selling prices will depend on many factors including government policies on land use fees because these fees are increased annually. This is one of the constituents of selling prices. So, to reduce house prices, State supports in capital and land-use fees are essential.

Real estate bubble may be formed

Dr Dang Hung Vo
Hanoi and Ho Chi Minh City property markets will go in different directions. While Ho Chi Minh City will focus on medium segments, Hanoi will develop higher classes. The rates among high, medium or low segments depend on how we manage. In the coming year, we need to increase the supply of low-priced segments to at least 60 - 80 per cent and higher classes to 40 per cent. Otherwise, oversupply will happen.

Given the market growth in 2016, we should not exclude the possibility that the market may form a bubble and price fever in the second half 2017.

Source: VCCI