Will real estate prices fall when new laws are implemented?

With the introduction of the land price table in the 2024 Land Law, real estate prices may continue to rise due to rising input costs. However, this increase can still be contained.

House prices will continue to rise

“Real estate prices may increase after August 1, 2024. Because the new Land Law will apply a land price list, which will increase the cost of compensation and land use fees. These factors will contribute to increasing the input price of the project,” said Mr. Vo Hong Thang, Investment Director of DKRA Group, speaking at the seminar “Finding investment opportunities in the second half of the year” organized by Dau Tu Newspaper.

Analyzing further, Mr. Thang said that when considering the capital structure of an investment project, the usual ratio is 2:4:4. Accordingly, equity capital accounts for about 20%; financial leverage is 40%, from banks and investment funds; the remaining 40% is mobilized from customers who pay early.

Mr. Vo Hong Thang, Investment Director of DKRA Group, believes that investment opportunities always appear in the market at any time. Photo: Chi Cuong

However, according to the new Law on Real Estate Business, the deposit for buying a house will not exceed 5% of the product value, instead of 30% as per the current law. Before handing over the house, the buyer only needs to pay up to 50%, a 20% reduction compared to before.

“When capital mobilized from customers decreases, capital from owners and capital borrowed from financial institutions will increase. At this time, the "scepter" will be in the hands of State management agencies, because financial costs will be greatly affected by the time of project licensing", commented the Investment Director of DKRA Group.

According to Mr. Thang, if the new laws speed up the removal of legal obstacles, financial costs will decrease, thereby "cooling down" the input costs of the project. When projects are removed simultaneously, investor sentiment will be relieved, and more money will certainly flow into the real estate market.

The leader of DKRA Group, commented that from now until the end of the year, the three new real estate laws will not have a deep impact on the segments, especially in the context of the complicated macro situation. Instead, the laws will need at least 6 - 12 months to truly penetrate the market.

Is it time to invest in real estate?

Experts at the Dau Tu Newspaper workshop all agreed that the market always has investment opportunities under any conditions. For example, in the past period, the old apartment segment in Hanoi was particularly "hot". Many investors knew how to seize the opportunity and "surf" at that time, achieving very attractive profit rates.

“The market has been moving sideways for more than 2 years now. Currently, interest rates are very low, investors who have cash advantages and are knowledgeable about the segment should invest in products with reasonable prices. However, at a time when the macro economy still has many variables, those who use financial leverage must be really careful,” Mr. Thang suggested.

According to DKRA's report, since the end of 2023, the market has shown signs of recovery but only focused on the B and C apartment segments in major cities. This segment is expected to continue to lead the market in the second half of this year.

However, Mr. Thang also frankly admitted that the current recovery is not really strong. According to survey data in the first 6 months of this year in Ho Chi Minh City and surrounding areas, the primary supply of apartments reached 15,000 units. However, the consumption only stopped at about 3,300 units, an increase of 8% over the same period.

“Even though the overall supply and demand have increased, the number is still insignificant, only 15-20% of the 2019 period. Besides, investors need to note that some other segments have not recorded signs of recovery, such as resort real estate,” Mr. Thang assessed.

Currently, market sentiment is divided into two extremes. One is that investors using financial leverage from the previous cycle still tend to hold on to profits and wait for opportunities. Two is that some investors holding large amounts of cash tend to continue to wait and see what the next developments of the market are.

“The data released by the State Bank of Vietnam in the first 6 months of this year shows that the total amount of deposits is over 13.6 quadrillion VND, despite the very low interest rates. This defensive mentality has caused the liquidity of the real estate market to increase but still be limited,” Mr. Thang shared.

Source: https://baodautu.vn/batdongsan/gia-bat-dong-san-co-giam-khi-cac-luat-moi-duoc-thuc-thi-d220855.html