Vietnam: No bubble but land prices might increase in urban areas

WHILE there are few, if any, signs of Vietnam’s real estate bubble bursting this year, the Ministry of Construction said that land prices could increase in some areas.

Those areas included planned special economic zones and new urban areas with developed technical and social infrastructure.

This was a normal market reaction, the ministry said.

Housing and Real Estate Market Management Department director Nguyen Trong Ninh said that hot areas for land would be in major cities like Hanoi and Ho Chi Minh City.

Some real estate experts, however, said that land prices were too high in Vietnam.

In some provinces and cities, land prices were inflated at rates much higher than the pace of economic and infrastructure development, said the Vietnam Association of Real Estate Brokers.

The association said that land would remain the top choice for real estate investors in emerging localities.

However, land prices were being inflated, leading to adjustments in taxes and higher compensation for site clearance.

This would negatively affect the market, the association said, pointing out that high land prices would lead to a fall in investment in urban development, and investors would leave the market, which would erode local socio-economic development.

The association’s deputy president Nguyen Van Dinh predicted that land prices would continue to rise, but the increase would not be significant this year.

Phu Vinh Group directorgeneral Phan Cong Chanh said prices were now at their highest levels due to the impacts of land fever in 2016-2018.

He said there were also concerns that land prices were too high compared to their real value, adding that it would be a difficult period for buyers and investors.

In some areas, land prices had reached fever point and the market could reverse the trend at any time, making it risky for investors, he said.

In the short term, land prices might experience fluctuations, he said. Still, over a long period, it would be on an upward trend, Chanh said.

Vietnam Report recently forecast that in the shortterm, the country’s real estate market would experience price fluctuations in order to set up new levels.

In the next few years, the market would undergo a purification process which would put weaker businesses out of the game to promote more sustainable market development, the company said.

The report revealed that real estate prices had risen by up to 200 per cent in some areas, compared to annual economic growth rate of around seven per cent, and a seven to eight per cent bump in income per capita.

The Housing and Real Estate Market Management Department said the management of land transactions had been tightened, especially after the case of Alibaba Real Estate Joint Stock Company’s fraudulent sales of houses and plots in southern provinces to appropriate trillions of dong.

The department said that investors now were more cautious, forecasting that land transactions and supply would decline significantly this year.