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Time to cool down property market

The Saigon Times Daily
Monday,  Mar 12,2018,18:42 (GMT+7)
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Time to cool down property market

The Saigon Times Daily

Signs of an overheated property market in HCMC have become more apparent, with skyrocketing housing prices and rampant speculation, though housing dealers and developers find it a good chance to gain quick bucks. The immediate consequences include poor people finding housing prices far beyond their reach, and a rush by secondary investors into the real estate market, while the property bubble gets increasingly inflated.

At a real estate forum organized last Friday in HCMC by the city’s Department of Construction and the HCMC Real Estate Association, experts voiced their concerns over the uncontrollable housing prices that are distorting the local real estate market.

Data from the forum shows that housing prices in the past five years have spiraled up far beyond expectations. In HCMC, where the price spike has been the steepest, condo prices on average have surged by 54% for budget units and 67% for high-class ones.

Prices of land, meanwhile, have jumped much stronger, by around 130% in District 9 and 170% in Thu Duc District, according to data from real estate service firm DKRA Vietnam. A small land lot in Thu Duc District thus may cost VND2.7-3 billion now from a mere VND1 billion just five years ago. Within such a short time span, all savings and earnings by a middle-income family seeking to buy a home have been turned trivial and meaningless.

Housing prices have surged not because of an undersupply, however. Data from the HCMC Department of Construction shows that nearly 9.7 million square meters of housing floor space was developed in the city last year, rising over 4%, while the number of land lots totaled some 7,200, rising 120%. Meanwhile, the city’s population growth is estimated at 3.9% annually.

Such a disparity between housing development and population growth should have resulted in prices falling given the steady economic growth. The upsurge in housing prices, therefore, is attributed to speculation.

At the forum, experts stressed that the absence of transparency, especially the lack of information regarding urban planning and project development, has created fertile ground for speculation. Profits for the most part flow to a small group of developers, plus secondary investors who mainly speculate to push up prices for a wider margin.

In addition, easy credit for the real estate sector are another factor. Although official data shows real estate loans account for a mere 8% of total outstanding loans, many experts hint that a large amount of consumer loans have been used for the purpose.

In order that the property market can develop healthily and that the people have easier access to housing, it is high time authorities intervene in the market. Apart from greater efforts to improve transparency, other much-discussed policies tentatively put forth earlier, such as high taxes on second homes and effective supervision of cash flow into the sector among others should be quickly introduced.

The Saigon Times Daily

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