No, maybe: industry insiders divided on property bubble

Reflecting on previous bubbles in 2008 and 2010, Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association (HoREA), said a bubble was highly unlikely in the current situation.

Recalling the aftermath of those years, when many people were forced to sell properties at 50 percent of the price they paid, he said, “There is no possibility of such a realty bubble in 2018.”

Professor Dang Hung Vo, former Deputy Minister of Natural Resources and Environment, said the market situation now was completely different.

“In 2007, land prices in all segments, including agricultural land, rose every week whereas prices rising in a steady manner now, and have actually decreased in some segments,” Vo noted.

Ministry of Construction data puts current property inventory value in the country at VND24 trillion ($1.29 billion), down 81.3 percent from the peak in early 2013. This includes VND5.2 trillion ($231 million) in Hanoi and VND4.5 trillion ($200 million) in Ho Chi Minh City.

Nguyen Trong Ninh, director of the ministry’s department of housing management and real estate market, said at a press conference on July 27 that the market would not change much until the end of this year, and so people don’t have to worry about “any bubble.”

The market is determined by factors such as economic growth, urbanization, monetary policy, forex movements, and tax policies, and none of these would change much during the second half, he added.

In the first half of the year, land prices in the country rose rapidly, especially in three hotspots, Van Dong (Quang Ninh), Phu Quoc (Kien Giang) and Van Phong (Khanh Hoa).

Special Economic Zones (SEZs) are planned in these localities with ambitious investment policies, causing people to fear the build-up of a bubble. But the local governments have acted decisively to nip this tendency in the bud, bringing down the so-called fever and forcing many real estate agents to cease their activities there.

Ninh said the market was “healthy” now and there was “no crisis.”

Su Ngoc Khuong, investment director at Savills Vietnam, also told Vnexpress that there was “no fever” and price increases in Hanoi, HCMC and Da Nang were understandable, given rapid population growth and growing incomes in these cities.

For instance, HCMC population increases by around 500,000 every year, including 250,000 immigrants, while the annual supply of apartments is only 10,000, which is just 5-10 percent of the housing demand, Khuong pointed out.

Do Thu Hang, associate director, research and consulting, Savills Vietnam, told local media, “We don’t see any crisis now.”

Better safe than sorry

Nguyen Xuan Quang, chairman of housing developer Nam Long Investment, told VnExpress he still feared a bubble, but added that his company was prepared to deal with it. There was a downward trend in property transactions in the second quarter, so it is too early to be optimistic about the market, he said.

Senior economist Nguyen Tri Hieu argued that there was the possibility of a bubble in the property market, explaining it was risky if land prices increased by 50 per cent in a year.

If the rate climbs to 70-100 per cent, the market would be in dangerous territory with the risk of the bubble bursting sometime next year, he said.

Quang of Nam Long Investment reiterated that his company was well prepared for the worst case scenario of a bubble bursting. He said the company has three weapons to protect itself: product diversity, a war chest of VND2.6 trillion ($115.5 million) and good income from commercial real estate. “This was strong enough to cope with any crisis that may arise,” he said.

Most importantly, with enough land for its needs for the next five years, the company would be unscathed if a land “fever” breaks out, he added.