Will price increases cause real estate bubbles in 2021?

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Keep the rhythm of steady increase

According to Savills, in contrast to most of the business sectors affected by the Covid-19 pandemic, the real estate industry continued to record growth, especially in the number of buyers.

“In particular, we didn’t believe in the real estate bubble hypothesis. We were confident that the Vietnamese real estate market could maintain a steady pace of growth. The real estate bubble was created by uncontrolled lending and speculation. Currently, banks did not lend without facilities and without reasonable reasons,” Matthew Powell, Director of Savills Hanoi confirmed.

At the same time, he said commodity prices depended on demand, and demand was increasing. Therefore, this growth was not at risk or out of control but was still in the safe zone.

In terms of house prices and land prices, with the level of property and the personal income of many people, not everyone could keep up with rising house prices. Therefore, we need policies to support investors to access affordable housing products and for low-income earners.

Surprisingly, there are many individual real estate investors not looking for high-end products, so many developers are now interested in developing affordable housing. In the last two years, many developers have shifted to this area.

From a broader scale, besides housing price and population, we must take into account important factors like guaranteed housing supply, development of facilities, favorable transportation system and market development in new areas and provinces.

According to Savills, if adequate land policies are in place, uncontrolled growth can be mitigated. Good management of land policies, policies on infrastructure development as well as housing supply, especially for social housing and low-income housing, play a central role.

To adjust house prices, we need more supply and an approach, instead of deliberately acquiring and lowering housing prices, so this is very difficult to do.

Need to run the real estate market to operate stably

Considering lowering house prices in the current conditions requires a lot of solutions from many sides, Do Thi Thu Hang, Senior Director, Research and Consultancy Division, Savills Hanoi said, in which, operating a stable and sustainable real estate market, interacting with the economy for mutual development is the most important task.

Once the economy grows well, people's income increases and the real estate market has diversified products to buy and rent will ensure opportunities for all people in need. Therefore, there is no need to worry too much about the price.

The market is in a stage of development, large investors participating in the market have experience. For each position and handover condition, the buyer can calculate the fair price. In 2021, a number of projects that expect too high prices will have to review the overall selling price and actual conditions of the project to ease pressure on the project when launching the product.

Previously, in early 2021, assessing the developments of the Hanoi housing market in the coming months of 2021, Savills experts said the prices of real estate segments in 2021 would be favorable for the projects in urban areas. In general, it would be tough to see big changes in the apartment market, said Nguyen Duc Them, Business Manager, International Housing Business, Savills Hanoi.

Regarding the increase in house and land prices, a report of Ministry of Construction stated that besides apartments, individual houses and land, the price still tended to increase compared to 2019. However, the amplitude of price increases varies greatly between localities as well as in regions of each locality.

In Hanoi, some land areas managed by people in villages and communes of Son Tay, Hoa Lac, Thach That, Hoai Duc are priced at VND 25-30 million/m2, up 50% compared to 2019. Regions such as Dong Anh, Gia Lam, Long Bien also increased by about 20-30% compared to 2019.

However, the Ministry of Construction said that through recognition and evaluation of market research units, a sharp increase in price in some regions mainly took place between speculators.

Along with the price increase due to investment in infrastructure development in some cities and projects, there is also a phenomenon of real estate speculators taking advantage of factors like urban planning preparation and preparation of building infrastructure projects and expanding urban areas to "inflate prices" to gain illicit profits.