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Let’s read into the signs of risk
Monday,  Apr 23, 2018,23:38 (GMT+7)

Let’s read into the signs of risk

There are calls from experts, and serious ones at that, over signs of a property bubble across the country, but it seems such warnings are still not heeded. For a couple of years now, property prices have taken on a fever, and the topic has been time and again stealing the limelight in local media.

The fever normally reaches a high pitch in areas chosen for major infrastructure development projects, a typical case being the plan to develop Long Thanh International Airport in Dong Nai Province. The provincial government there has urged all relevant local agencies to come up with measures to douse the sizzling-hot property rush, but mostly to no avail, as investors from across the country are still flying in for land transactions, despite without recognition or approval by competent agencies. Risks are looming large there for potential homebuyers.

Most recently, at a meeting last week, the Government called on leaders of Quang Ninh, Khanh Hoa and Kien Giang provinces to map out effective ways to deal with overheated land trading in the special administrative economic zones to be developed in the three localities. Representatives of the provinces at the meeting admitted rampant land transactions and speculation led by land brokers there.

But the feverish property market is not confined to localities with major development projects only. In reality, most major cities in the country have witnessed such an abnormal property picture. Take HCMC for example, the land price has skyrocketed over the past couple of years, with some districts seeing the price to double or even treble within a short span of time of one year or so. And that situation poses huge risks, not only to homebuyers but the whole economy as well.

The first sign of a property bubble, as agreed by most experts, is that its price increase is far faster than the salary increase, and this sign proves fearfully right to the local property market. Other signs include subprime lending, lots of financial leverage taken by homebuyers, and the quick emergence of many land sharks among others.

As the bubble gets more inflated, financial resources will be drained out of manufacturing into the property channel deemed to be hyper-profitable. The consequences will be long-term ones.

If all the signs stated above prove true to the local market, and given the absence of quick intervention, a time will come when the bubble bursts rather than gradually deflates. To a lesser extent, banks will see their bad debt rising, while the worse scenario will be economic stagnation or recession.

Preventive solutions are always less costlier than curative ones, so it is high time the Government dig deep into all the abnormal phenomena surrounding the property market. Only the Government with all the think-tankers around has the capacity to gauge the real severity of the issue, and has all the necessary vehicles at hand to contain the risk.

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