HCMC real estate has many potential risks but the bubble situation may not happen

	M&A abuzz in real estate market
	Many large real estate projects with violations of public land use are inspected
	Advanced real estate will meet obstacles due to decline in purchasing power

Apartment market tends to develop sharply: Photo: T.H

The market still has potential risks

In the first six months of 2017, the City developed 4.92 million m2, increasing the total area of housing in the city to 157 million m2 and reaching 18.47 m2/ person on average. The commercial housing market of the city in the first 6 months has 32 future housing projects which have been confirmed by the HCM City Department of Construction to be qualified for capital mobilization with a total 16,506 houses (including 14,754 apartments and 1,752 low-rise houses) with the total value of 30,599 billion vnd to be mobilized. Of which, the luxury housing segment has 5,164 apartments, accounting for 31.3%, the medium-priced housing segment has 5,136 apartments, accounting for 31.1%, and the affordable housing segment has 6,206 apartments, accounting for 37.6%. Thus, the proportion of affordable apartments is the largest (68.7%) of total apartments launched in the first 6 months.

According to Le Hoang Chau, Chairman of HoREA, this is a good sign because investors and businesses have a strong product restructuring towards strongly increasing small and medium sized apartments (1 -2 bedrooms) which meet the actual needs of middle and low-income urban people and are easy to be liquidated. However, overall, the number of apartments offered declined compared to the same period in 2016: the affordable housing segment rose by 1.9 times, the luxury housing segment rose by 1.8 times, but the medium-priced segment fell to 42.1%, even large developers who specialize in medium-priced housing projects have not got products to be sold in the first 6 months of this year. HCMC’s Office for lease market is developing quite stable, total current office supply for lease is about 1.8 million m2; In the first six months, the rental fee for grade an office averaged US $ 37 / m2 / month, Grade B US$ 22 m2 / month, slightly increased from 1.2% to 4.8%; There is no new grade an office supply, and new grade B office supply has only 1 building with an area of 5,500 m2.

The market of hotel apartments, serviced apartments and condominiums are developing quickly in the past time with the sign of supply over demand. The proportion of condotel apartments currently accounts for 56%, higher than the hotel and resort apartment supply (only accounting for 44% of the total supply), which is unusual, because, normally in many countries, the condotel apartments are generally lower than the hotel and resort apartment supply; and the commitments for profit up to 12% per year in 8-12 years of investors is too high, not ensuring sustainable development and involving potential risk factor for secondary investors; One problem that should be solved by the State is the legality of this product type which has not been clarified in the Housing Law; Overall, the real estate market has still potential risks such as the demand-supply deviation, mainly in luxury real estate and resort housing segment; The credit capital of banks and social capital (mainly of homebuyers) for the real estate market are very large, focusing on some large sized enterprise and luxury real estate tourism and resort apartment segments; At the same time, there has been an increase in many secondary business investors; while the social housing market and affordable housing segments have high liquidity, demand is beyond supply. The real estate market has not developed transparently, healthily and sustainably due to many shortcomings.

The real estate bubble is unlikely to happen

From the actual analysis, the HoREA predicted that the real estate shall be still in the growth period but continue to grow slowly compared to 2016. It is forecasted that in the 2017-2020 period, measures to solve the current supply-demand deviation will be issued, that makes the market develop more healthily and stably

Besides, the market will strongly shift to the affordable housing market to meet the needs of medium and low –income people.

The business merger and acquisitions and project transfer will grow stronger than before, especially after August 15, 2017, when the National Assembly's Resolution on NPLs takes effect. The state will issue many legal norms and use tax tools, such as imposing tax for people who own many houses; real estate tax; credit tools (such as roadmap to limit credit into real estate market in accordance with Circular 06/2016 / TT-NHNN of the State Bank); tools for land use planning; urban housing development planning; Administrative tools to bind the investor's obligations to protect the consumer (such as bank guarantees, project eligibility for funding, announcing mortgaged projects, investors must pay off the mortgage or banks must accept the mortgage, the houses to be formed in the future shall be sold) to develop the real estate market transparently, healthily and sustainably. It is predicted that the administrative procedures will be simpler, gradually reducing the current harassment

At the same time, the real estate market has also potential risks such as supply-demand deviation, a sharp increase in secondary investors, or the credit supply focusing on a number of large investment corporations and luxury and resort housing segment.

The subjective negative factor is the supply-demand deviation in the luxury housing segment (including tourism and resort houses); The situation that some large real estate corporations are receiving large amounts of credit capital and mobilizing a lot of social capital (including many consumers and secondary investors) is also potential risk factor, affecting the real estate market in the coming time.

HCM City’s Tax Department: Dialogue, advise tax for real estate enterprises. VCN- HCMC Tax Department held a roundtable dialogue, supporting newly-established enterprises in the field of real estate. ...

Regarding the forecast of a real estate bubble in 2017, HoREA said that it is unlikely to happen due to the timely and effective intervention and adjustment of the State; efforts in investment restructuring and product orientation to meet the needs of the market and due to the secondary investors’ wisdom and awareness of the market.