Mr. NGUYEN MANH HA, Chairman of Vietnam Real Estate Brokerage Association, spoke with Saigon Investment on the current unreal boom of the real estate market, which is largely the result of such unrealistic information.
JOURNALIST: - Sir, from the beginning of this year, the real estate market has seen an abnormal increase in prices in many segments. Is this an unreal boom phenomenon?
Mr. NGUYEN MANH HA: - The unrealistic price increase in the real estate market in recent days has spread to many places and localities. This situation does not only happen in terms of land, but also for houses, resort real estates, and apartments. In theory, when the demand is higher than the supply, the need to buy real estate increases but if there is insufficient supply, then there will be an extraordinary increase in prices.
The fact that the real estate price is too high compared to the real value does not come from real demand but because of speculation. As noted by the Ministry of Construction, the land plots in many localities have experienced a strong increase in prices. In addition to infrastructure development in some specific cities and projects, there are also a number of speculators taking advantage of factors such as urban planning preparation and construction of infrastructure projects and urban expansions to blow up prices. This has a negative impact not only on the management and use of land locally, but also on the sustainable development of the real estate market.
- Sir, what is the main reason leading to the current unreal real estate price boom?
- The real estate market always fluctuates according to the macro policies of the State, the participation of more or less investors, the direction of capital flow, and the investment trend. Among these, planning is always the most important factor that strongly affects land transactions and investors. Therefore, the State moves on planning or any information about planning of infrastructure, can be used by speculators to spread news, blow up land prices, and create unreal land fever. I think the main reason leading to the current unreal real estate price fever is spreading of unrealistic information on planning.
In essence, in the process of planning, the State does not trigger an increase in land prices, but the impact of urban planning on the real estate market is huge. To this extent, the impact is positive, and of course, housing prices will increase when the urban infrastructure is built more spacious and monumental than before.
The corollary is that many people invest in real estate according to the psychology of the crowd, especially in society with much idle money. Many people have the desire to get rich quickly, so they race to pour money into real estate, even though they have no knowledge of the market, no need for investment, but because they are eager to make profits. It should also be added, that our planning information issue has not been transparent for a long time, and people cannot know that planning information is right or wrong, or when the implementation will begin. This has pushed the investors into a conflicting situation on land prices.
- Sir, in the past, there were consequences for both investors and the economy from the real estate bubble. What effective measures do you think are necessary to prevent such a situation?
- As I said, information must be made public and transparent by the State. Transparency must be provided on both planning and land prices. In the past, there were many valuable lessons learnt from the unreal price increase of the real estate market, which does not reflect the true nature of the market. As a result, it has led to extremely heavy losses not only for inexperienced small investors, but also for the entire society. The bursts of real estate bubbles, such as during 2000 to 2001 and again from 2007 to 2008, are lessons that still remain valid. They also started from unclear planning information and investor illusions.
In the revised Land Law 2013, there is a provision on state management of land, under Clause 9, Article 22. Unfortunately, the data on land prices nationwide has not been formed so far. Consequently, pricing companies, buyers and sellers only have to rely on the land price list of the provinces for reference and as a basis for price increase. Therefore, the solution is to develop a national data on land prices. Only then can the State control and regulate the real estate market, bringing back true values.
- Sir, what are your recommendations for current real estate investors?
- I think that investors need to be careful before investing money in any project. Clients need to consider many factors such as the location, the reputation of the investor, the potential for development, as well as the profitability of similar projects that already exist and come into operation. From there on, it is possible to set a specific strategic direction when investing in real estate.
In my opinion, land value is not really high due to lack of synchronous investment in infrastructure. Land prices surged in recent years mainly due to land price blowing up, and real estate brokers pushed prices to disturb the market. Therefore, if investors are inexperienced and do not carefully study the market situation, they will lose money. At the same time, the State management agencies also need to be more active in market management, and it should give open and transparent information to help the real estate market develop in a sustainable way.
- Thank you very much.