In the early spring of Tan Suu, Covid-19 broke out again and complicated developments, but despite this variable affecting people’s lives and the economy, experts believe that real estate prices are difficult to reduce, even still increase.
Forecasts are based on the previous basis, the first Covid year (2020), real estate prices also increased abnormally during the two epidemics. Further, looking back at the data from market survey units in the past 5 years (from the beginning of 2016 up to now), housing prices still conquer new records, in which the peak is the period fever. period 2016-2017 and early 2018.
Whether in normal or pandemic conditions, goods are abundant or scarce, liquidity is high or low, real estate prices still rise sharply. Although many people are optimistic when asset prices escalate, many experts have begun to worry about the phenomenon of price bubbles that accumulate, which are increasingly inflated, threatening the sustainable development of the real estate market.
Exchange with VnExpressHuynh Phuoc Nghia, Vice Dean of International Business – Marketing Faculty, University of Economics Ho Chi Minh City, admitted: “The real estate price bubble is expanding but difficult to burst. This is a paradox, but reasonable in the personal context of the Vietnamese market”.
Mr. Nghia analyzed, first look at why housing prices increased. There are many reasons: high input costs (mainly land fund) difficult to create, increasing financial costs, escalating material and labor costs. Legal problems lead to slow supply, scarcity of new goods, causing prices to rise, continuously developing infrastructure also stimulates asset prices to be pumped and blown with rain…
Another subjective reason is that real estate developers and investors race to sell at high prices. However, there is a group of more dangerous factors affecting the formation of price bubbles that are investors’ expectations in this market that are too large, even so strong, that nothing can stop them.
Thu Duc City real estate market . Image: Quynh Tran.
“For most Vietnamese, the real estate investment channel is the ‘goose that lays golden eggs’. Or if they don’t see real estate as an investment property, they still buy it at all costs for the purpose of shelter and savings. This is the source of the abnormal behavior afterwards,” Nghia said.
In the past 5 years, real estate prices have skyrocketed by a huge margin due to inflated expectations. The picture of the market is always viewed through an optimistic lens, some are well-founded, but many expectations are just assumptions for the future. All real estate market participants have high property price expectations. Enterprises expect, secondary investors, speculators, customers F1, F2… also expect to follow.
Instead of using and exploiting the functions of real estate, real estate investors have a common feature that only sellers transact with each other. Specifically, the first seller (F1) sells to customer F2, then becomes the second seller to hunt for customer F3, which will be the third seller. This rotation is so popular that there are relatively few sales to consumers (buy to use). For every real estate seller, there is an expectation of a higher price, forming the concept of an expected price. If expectations are too high, it means that real estate prices are inflated too quickly, which will accumulate into price bubbles. If the bubble gets too big, it is very dangerous because it can lead to burst (collapse).
According to Mr. Nghia, the biggest paradox is that the real estate price bubble is expanding but hard to burst. Because although asset prices have been climbing for half a decade, there has not been a price shock. To make it easy to imagine, a price shock is an expected price collapse, which means that no one buys real estate at high prices, sellers have to lower prices because they want to sell, but it is still difficult to find buyers in the end. remove (sell at a loss) to exit the goods. The market has not had this phenomenon in the past 5 years because even when selling at a lower price, investors still make a profit. The fact also proves that new projects offered for sale at record prices compared to the regional price level still have buyers.
“Currently, the possibility of a housing price bubble bursting is unlikely because property holders are determined to hold goods, keep prices high, and are willing to accept delays in transactions to preserve expected prices. In other words, the Property owners, i.e. sellers who have not yet fallen into a situation of impending doom, have to sell out,” explained Mr. Nghia.
Vice Dean of International Business – Marketing Faculty of Economics University of Ho Chi Minh City warned that when the housing price bubble swells, it is time not to be subjective. Because once the price bubble collapses, the consequences are very unpredictable. The over-inflated real estate price bubble will not contribute to the development of the economy, even worse. When it costs too much for real estate, it will gradually lose investment costs for creativity and gradually lose the opportunity to reinvest in the economy. Even social security instability also occurs because housing prices are too high.
Nguyen Loc Hanh, General Director of Ngoc Asia Company, confirmed that real estate prices in many places are increasing abnormally in 2020, despite having increased for many years, leading to the risk of price bubbles forming. very big. However, it is difficult to measure the risk coefficient or attribute the housing price bubble to the whole market because real estate is very local.
The signs to identify a price bubble are comparing prices by region (because price fluctuations vary from place to place), while also taking into account liquidity. The optimistic assumption that there will always be someone willing to buy the property is on the market at record high prices and regardless of the real value of the property, the question is how many real deals are there. success. When you see the price rising, fearing a price bubble, look at what level of liquidity is reached. If the price is high, the liquidity is also high which means the bull cycle is not over yet. If the price is high, the liquidity is low or no one is buying, it is possible that a price bubble has started to appear.
Mr. Pham Lam, CEO of DKRA Vietnam, said that the increase in housing prices is a sign that the real estate market is still in a growth cycle. Instead of worrying about bubbles in real estate prices, let the market regulate itself.
DKRA CEO explained, the market operates according to the law of supply and demand. When supply and demand meet (successful transaction), ie the price no matter how high or expensive has been accepted and this is the real price, also known as the market price.
Real estate price bubbles only really occur when the property is sold and no one is buying, also known as the virtual price. Although property prices rose mainly on expectations for the future, only well-founded expectations fueled growth. “Let the market speak for itself which is the real price and which is the bubble price,” Lam said.
According to Vnexpress