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How will the real estate market be in 2018?

09:42 | 16/12/2017

VCN- It is said that 2018 will continue to be a stable year in the development of the real estate market, however, there are still challenges and considerations for the market to avoid unfortunate risks.

how will the real estate market be in 2018
Real estate market in 2018 is expected to flourish. Photo: Thu Hien.

Real estate inventory fell.

2018 FDI attraction is expected to continue to grow in 2017, especially after Vietnam successfully organized the APEC summit and negotiated the Trans-Pacific Partnership on Transparent and Comprehensive Progress (CPTPP). Data from the Foreign Investment Agency (under the MPI) shows that real estate currently ranks third among all sectors attracting foreign investment in 2017 with nearly $US 7.6 billion and ranks second in FDI attraction in the past 30 years with $US 16.6 billion. Experts also expect the real estate market in 2018 will have more optimistic signals, from the perspective of quality growth of the market as well as attracting real estate FDI in the past.

One of the highlights of the property market in 2017 is that inventories are on the decline. Data from the Housing Management and Real Estate Market (Ministry of Construction) showed that real estate inventory has been actively handled. By October 2017, real estate inventories remained at VND 26,000 billion, and by November 2017, this figure was more than VND 25,700 billion, down by 17% compared to December 2016.

Compared with the figure of nearly VND 103,000 billion, in the first quarter of 2013, the real estate inventory had fallen by nearly 80%. In the past, the State Bank of Vietnam has instructed credit institutions to actively deal with bad debts, especially bad debts in real estate. The rate of non-performing loans for real estate enterprises has fallen sharply from 7.05% in 2013 to 4.06% as of today.

According to economist Can Van Luc, one of the highlights of the property market in 2017 is the impressive number of real estate companies showing dramatic increases. In the first 11 months of 2017, there were 4,500 newly established real estate companies, an increase of 60% in number of enterprises, and 155,300 in newly-established construction businesses. The capital size of enterprises also increased sharply from around VND 20 billion / enterprise in the past to VND 68 billion / business in 2017. The business result was also positive by the end of September, real estate listings increased by 40%, and profits increased by 6%.

According to another perspective of Vietnam’s real estate market in the year 2017, Pham Thanh Hung, Vice Chairman of CEN Group, said that 2017 is a successful real estate year for tourism and convalescence, as the tourism market developed strongly, creating a prerequisite for resort development. In addition, the land segment has achieved many successes in 2017 when prices were pushed up very high and with a terrific volume of transactions. Accordingly, in 2017, the ground fever has appeared in big cities and provinces such as Da Nang, Dong Nai, Hanoi, Ho Chi Minh City, etc. Land prices in these provinces have increased sharply from 50 to 70 % (Dong Anh, Hanoi), even increasing 2-3 times (Da Nang, HCMC) and lasting for several months. According to Mr. Hung, the ground is the sector that started cold, but has become increasingly hotter over time. As a result, this sector of the economy shows that the market is in a mature stage of its development cycle.

Although the real estate market 2017 maintained stable development, according to the Ministry of Construction, the real estate market is still limited. Accordingly, the inventory has decreased, but it is still quite large. The high-end housing supply is now abundant, while the supply of social housing and low-price commercial housing lacks a lot of demand. In addition, information on the real estate market is incomplete and inconsistent; it does not guarantee publicity and transparency, thus making it difficult for state management as well as people to participate in the market. At the same time, there are signs of speculation and information distortion in distribution stages. Many commentators also said that the lack of information transparency will continue to be a challenge for the property market in the coming time.

Competition will be tough

Information on the real estate market is currently incomplete and inconsistent; It does not guarantee publicity and transparency, thus making it difficult for state management as well as people to participate in the market. At the same time, there are signs of speculation and information distortion through distribution. Many comments also said that information lacking transparency will continue to be a challenge for the property market in the coming time.

Commenting on the real estate market in 2018, Mr. Can Van Luc said, 2018 real estate market will continue to have positive momentum. This may not be true for all segments but will be true on a general level. Currently, tourism is one of the key economic sectors that obtained good results, so this will be the driving force for real estate market development not only for 2018, but also in the coming years. With the warming of the land sector, Mr. Luc noted investors should be careful because in the past it has been risky.

On the real estate market in 2018, Vice Chairman of CEN Group said that next year, the supply of real estate will be secured. The number of construction projects waiting for licensing are quite large, so the competition is increasingly tough. According to CEN Group's representative, in the period 2018 - 2020, the real estate market in Vietnam will really integrate. So, in the next 2-3 years, the real estate market will become globalized, making it easier for Vietnamese people to buy houses abroad, while foreigners will also buy more houses in Vietnam.

Therefore, the export of real estate will take place on the spot, because real estate companies will acquire foreign currency from individual foreign customers, and not only through the form of FDI. Domestic enterprises will also have to compete to attract this capital. In addition, Vietnam will officially open the retail market in 2018; this is the premise for foreign retail investors to invest in Vietnam due to high liquidity and high profit, and this will have a strong impact on the development of the real estate market.

Many have expressed the opinion that the real estate market in 2018 will develop vibrantly because in the next year many corporations will divest from other sectors, in order to have a larger part of the real estate market. Notably, with good economic growth the attraction of FDI will increase rapidly. Real estate is still top of the list for FDI attraction, and this will continue to be the driving force for the real estate market in 2018. Along with that, future macro policies will be more liberal to affect big changes, which will be the time for the real estate market to develop.

Currently, important laws related to the property market such as the Construction Law (2014), Housing Law (2014), Real Estate Business Law (2014), Urban Planning Law (2009) are in the process of modifying and supplementing; in order to further improve the investment and business environment by reducing the conditions for business investment, simplifying administrative procedures in housing construction, and real estate business investment, creating favorable conditions for transparency and equality for people and enterprises. In addition, the Land Law and Investment Law are also being revised, and they will be the driving force for the real estate market to develop.

In particular, Vietnam is promoting the establishment of three special economic zones of Van Don, Northern Van Phong and Phu Quoc, which is expected to create a new attraction for the market, especially property resorts. According to Mr. Can Van Luc, the establishment of three special economic zones is the focus for the socio-economic development of Vietnam. Currently, Ho Chi Minh City has a special mechanism and if Ha Noi is approved, these 5 areas will become 5 kicks for socio-economic development, including real estate. Land prices in these areas will increase in the future, so real estate here will have a great potential for development.

By Hoài Anh/ Kiều Oanh