With a series of support policies from the Government and the State Bank, from the second half of 2023, the real estate market has shown signs of improvement in transaction volume in some segments. It is expected that real estate in 2024 will continue to recover.
Mr. Nguyen Minh Giang, senior client asset management expert of KB Securities Vietnam Company, shared with PV. VietNamNet about the real estate market as well as real estate stocks, prospects in the year of Giap Thin 2024.
Bright spots are apartments and single-family homes.
- The real estate market has shown signs of recovery in the second half of 2023, what is your assessment of this assessment?
Mr. Nguyen Minh Giang: The real estate market in 2023, according to my observation, has had a slight improvement in the second half of the year but it is localized and has quite clear differentiation. The old apartment segment in big cities such as Hanoi and Ho Chi Minh City continues to increase in price. Some projects opening for sale of mid-range apartments have attracted investors to put money down.
In addition, the private housing segment has also recovered quite well. Some provinces and cities with strong public investment development are also places where many investors seek out and the selling prices in these areas have also decreased less than the general level. For the land segment, suburban land, shophouses, resort villas, ... continue to witness gloom.
The National Assembly has just officially passed three important laws that directly affect the real estate industry: the Housing Law (amended); the Real Estate Business Law (amended) and the Land Law (amended).
The real estate sector is highly dependent on legal factors, thereby unlocking capital sources and speeding up project implementation. Therefore, investors are hopeful that the above 3 laws, officially applied from January 1, 2025, will be a boost for the market to flourish and develop sustainably in the new cycle.
- Moving into 2024, how do you assess the continuation of the market's recovery momentum?
In 2024, the loose monetary policy orientation continues to be an important factor helping the real estate market maintain its recovery momentum. A large amount of residential deposits from late 2022 and early 2023 will return to production and a part of them will find investment channels. In which, real estate is always a priority. When the management policy is stable and investor confidence returns, the real estate market tends to warm up.
The market outlook is positive but likely to be localized and fragmented.
High-end segments such as resort villas, shophouses, etc. will continue to be gloomy, lacking investors. Along with that, the speculative segment of land and "green rice" land will also continue to be quiet because most investors participating in this segment use high financial leverage, real demand is not much, and legal procedures are still unfinished. The oversupply situation in this segment is very large, so it is difficult to improve in 2024.
In addition, the apartment segment in big cities such as Hanoi and Ho Chi Minh City has prices suitable for people with average income. Next, the individual housing segment will also continue to recover with real demand from the people.
Facing 3 challenges
- According to you, what challenges does the real estate market still face?
I think the real estate market is facing three challenges.
First, it is the general context of the economy. In 2024, the global economy may slow down. Domestically, credit growth by the end of October 2023 reached only 7.39% and only really accelerated in the last two months of the year to reach 13.7% growth. From that, it can be seen that the demand for new loans from businesses and people is very low when the interest rate was quite high before.
The world economy in general is still in a gray area. Domestic cash flow is very low. Vietnam's manufacturing PMI index has been below 50 points for many months, which is also a sign that the demand of the economy is still quite low. Therefore, not only the real estate sector but all sectors of the economy are facing this challenge.
Second, it is cash flow. Accounting for more than 21% of total credit in the economy, in 2023, real estate business loans increased more strongly than the industry's general growth rate. This reflects the effectiveness of policies to remove difficulties and solutions to help real estate businesses access capital.
But it should be noted that the operating cash flow of most real estate businesses is facing difficulties. In 2023, the number of businesses with new projects for sale is very small, and the core business cash flow is mostly negative.
If by 2024, projects cannot resolve legal issues and complete infrastructure to bring products to market, risks will exist. Not to mention, the pressure to mature bonds is huge, with more than 120,000 billion VND. This is the largest maturity in the past 5 years.
Third, it is the legal factor. Real estate businesses encounter many difficulties in the process of implementing projects. This is also the reason why supply has decreased in recent years.
A newly implemented project requires 70% of capital contribution from customers and loans. The investor only accounts for 30% of the capital. If legal difficulties arise, the enterprise cannot access capital to implement the project, which will slow down the project, increase costs, leading to many consequences for the enterprise and risks for the market.
Therefore, I think that legality is the key factor of the real estate market.
Reversing from 2025, real estate will break out from 2027?
- When do you think the market will reverse? What advice do you have for real estate investors?
The primary market in the period of 2024-2025 will have a reduction in selling prices from investors. This is necessary for businesses to step out of the difficult circle. Supply and demand can meet more easily. This is also one of the signals to find the turning point of the real estate market.
Another important signal is the population's income. With a decline in population income, it is difficult to see a reversal point in the real estate market in 2024. It will probably only be a slow recovery, mainly differentiated.
The next important factor is legal, with three important laws taking effect from January 1, 2025. This is also considered the transition time between the old and new cycles.
According to my research, usually after a reversal point, the market will need at least 2 years to stabilize and grow strongly again.
Therefore, I predict that the second half of 2025 will be the turning point of the real estate market. From 2027 onwards, the market will really improve when the economic cycle also passes the difficult period, the legal system is complete, and people's income begins to grow again. Enterprises will also rise with appropriate business orientations.
For investors, I think managing personal cash flow and choosing the right time to invest in this context is extremely important.
When the economy is still in an unclear stage, the geopolitical context is not stable, the allocation of investment proportions must be appropriate and can go a long way. With real estate, investors should look for real estate in the central core area with cash flow real estate. In addition, there are areas that are strongly promoting public investment disbursement, the segment for low-middle income people, etc. The important thing is to choose the right time based on the market's reversal point so that the cash flow can promote the best investment performance.
Real estate stocks closely follow the hot and cold of the real estate market.
- How do you evaluate the stocks of real estate companies listed on the stock exchange?
I believe that the real estate market is always closely related and in agreement with the stock prices of listed real estate companies.
During the 2021 land fever, real estate stocks increased 5-10 times in just a few months. In 2022, when the real estate market froze, many real estate stocks had prices that "divided 5-10 times". I often call real estate stocks "as high as they go down", which clearly reflects the nature of the market and the difficulties of businesses.
In 2022, many investors and real estate business owners had their stocks liquidated. That was the most difficult period for real estate.
However, there is always opportunity in danger. The most difficult time is always the best time to "hunt". Objectively, many listed real estate companies are facing difficulties due to massive project development and high leverage. However, there are also many good real estate companies and this is the time when they will go hunting.
I predict that 2024-2025 will be a boom in mergers and acquisitions (M&A) in the real estate sector.
For individual investors, this is also a great time to screen businesses and look for quality companies to invest in with a long-term vision.
A good business needs to have good and healthy financial potential. These businesses have little debt, with low leverage. The business itself also needs to be flexible in its business orientation such as switching to the segment for the middle-income group, building social housing, etc. to maintain revenue and cash flow in the current difficult context.
Financially strong businesses at this time will have many M&A opportunities to bring sustainable development value for the new cycle. This is a note for investors to pay attention to when looking for a good business.
It should be emphasized that the real estate market's operating cycle will be longer and slower than the stock market in general. Investors should have a long-term perspective if investing in real estate stocks at this time, because the "super big" wave of real estate has passed. To form a big wave like 2021, the real estate stock group has accumulated for 7-8 years.
Thank you!
According to you, which highlights in the three new laws: Housing Law (amended); Real Estate Business Law (amended) and Land Law (amended) when applied will have positive impacts on the real estate market in the new cycle?
* That is to give Vietnamese people living abroad the right to do real estate business like people in the country. This will help increase the annual remittances to Vietnam. Vietnam is in the top 3 countries with the highest remittances in the world.
* Tighten subdivision and land sales. This will minimize land speculation, avoid wasting resources, and focus on segments with real demand.
In the coming time, real estate businesses must orient themselves to suitable real estate segments for the new cycle, thereby contributing to stabilizing and developing the real estate market more sustainably.
* Granting pink books for mini apartments and not specifying the term of apartment ownership.
* Land without land use documents before July 1, 2014 will be granted a red book.
* Eliminate land price framework, determine land price according to market principles. Diversify compensation forms for people whose land is recovered. Arrange resettlement housing before recovery. Those whose agricultural land is recovered will be compensated with residential land/housing.
This helps people benefit more and businesses can easily clear land and implement projects faster.
* Businesses are paid land use tax annually instead of having to pay it all at once.
* More open mechanism for agricultural land such as maximum individual ownership increased from 10 times to 15 times. Individuals who do not directly produce agricultural land are still allowed to receive transfers of rice-growing land.
In summary, these three amended laws have a profound impact on all aspects of society as well as all classes of people. When put into effect, they promise to help businesses overcome legal difficulties, as well as reorient the development of the real estate sector in the new cycle. The supply of real estate will gradually return and move towards products that bring sustainable value to the economy and target the essential needs of the people.
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