Ho Chi Minh City's property market recovers, but not without risks

By Dam Tuan   October 27, 2016 | 10:43 am GMT+7
Ho Chi Minh City's property market recovers, but not without risks

The local real estate association warns that speculators have returned to the market, which had its crisis nearly a decade ago.

The real estate market in Ho Chi Minh City continued to recover in the first nine months, but it's fragile due to a severe supply and demand imbalance and a high level of speculative risk, according to an industry group.

The HCMC Real Estate Association said in its new report that more units in the luxury segment hit the market during the period even though the demand has cooled. On the contrary, the number of affordable apartments remained small, failing to meet the housing need for a majority of the population.

According to the association, there is simply not enough budget units that cost less than VND1 billion, or around $45,000.

It said 47 new residential projects were registered in the first nine months, set to supply 24,461 units, most of which are apartments, in the near future. But only a small number is in the low-cost segment.

Several luxury projects developed by Vingroup and Masteri will be ready soon.

ho-chi-minh-citys-property-market-recovers-but-not-without-risks

HCMC's real estate is embracing emerging risks which could draw the market in the stagnation. Photo by VnExpress/Vinh Hien

The association said that speculation remained a cause for concern, with around 50 percent of all transactions linked to speculators who wanted to make a quick profit, mostly from upper-middle and luxury grade projects.

This could push up prices and widen the gap between the market and homebuyers with real housing need, according to the association.

In the real estate market, it is not always easy to distinguish between investment and speculation. But real estate speculators were generally believed to be the culprits causing the bursting of the local housing bubble in 2007, when they accounted for 70 percent of all sales.

The real estate association also espressed its concern about the central bank's credit policy and souring debts in the banking system, which would eventually affect funding for both developers and buyers.

However, it said there is little threat of another bubble next year because the economy is expanding in a stable manner and lending rules are not loose.

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