Limited supply pushes up home prices
Since 2018, policies related to capital sources and decisions of agencies and departments in controlling the real estate market have caused a serious decline in the supply of residential real estate.
The demand for housing is constantly increasing, putting "pressure" on supply, pushing real estate prices to continuously set new levels.
Data from the Vietnam Association of Realtors (VARs) shows that over the past 10 years, real estate prices have increased dozens of times. In 2021 alone, the average house price grew by double digits, even many times higher than the same period.
Real estate prices are likely to increase in markets with a shortage of supply, especially in high-demand real estate types. (Photo: LD)
Low interest rates and record-high inflation are contributing factors to the sharp rise in home prices, but the core of the problem is a shortage of supply.
According to the Ministry of Construction, with the current population growth rate and housing demand, about 70 million square meters of urban housing must be added each year. Thus, with the current supply development situation, according to VARS estimates, each year Vietnam will have a shortage of about 300,000 housing units due to the emergence of new urban households, especially from the need to "live separately" of the younger generation separating from extended families.
This severe shortage will certainly push home prices even higher. However, this shortage is not across all segments, meaning that not all types of real estate will be affected in the same way.
In fact, the supply shortage only occurs in certain areas and segments.
Accordingly, while rural areas, the outskirts of leading cities or in type III and IV cities have sufficient or even excess supply, urban areas are facing overload pressure due to the increasing demand for housing.
Looking at the big picture, while the supply of residential real estate, especially affordable housing, is and will likely continue to be in short supply in the future, high-value resort real estate is present in the inventory portfolio of most real estate giants.
Prices will continue to rise at a slower rate
Mr. Nguyen Van Dinh, Chairman of VARs, said that as a highly localized product, real estate prices will increase at different rates in different regions and markets, mainly depending on the supply-demand balance. However, in general, housing prices may not increase much in 2024.
In fact, drastic solutions to remove difficulties for the real estate market have been effective. The supply side of the market has accessed credit capital. However, housing loans are on a downward trend.
Because in the context of economic difficulties, home loans to serve real housing needs are not the top priority of people at the present time. Moreover, the existing supply on the market is not suitable for the needs and financial capacity of the majority.
At the same time, "strict" lending conditions, difficult to satisfy, along with a risky investment and business environment, force investors to be more cautious, causing the number of potential customers participating in the market to decrease. Difficulties in developing social housing projects, including handling investment procedures, accessing capital, sales, etc., will also directly affect housing prices because it affects the progress of handover and housing construction.
“The longer it takes to fix the above input problems, the more likely it is that housing prices will continue to rise,” Mr. Dinh said.
Recently, the risk of bad debt has increased, forcing banks to continuously sell thousands of real estate products to recover debts. Millions of loans with real estate as collateral are expected to mature in the near future.
The outcome of the loans and how the borrower chooses to handle the financing can all affect home prices. Whether borrowers choose to sell their homes or have their homes foreclosed on increases the supply of homes, slowing the rate of price appreciation in the market.
VARs recommend credit policies to limit speculation. (Photo: DM)
However, VARS forecasts that the apartment segment in big cities will continue to increase steadily because supply has not yet kept up with customer and investor demand.
At the same time, most of the upcoming projects in Hanoi and Ho Chi Minh City are located in districts far from the center, where land funds are still abundant. The constantly improving infrastructure will continue to push the price level of these projects higher in the future.
To increase access to safe and affordable housing for people in the context of population growth and urbanization, Mr. Dinh said that Vietnam needs to solve the most important link in the chain of increasing real estate prices - lack of supply, due to land not being used optimally.
At the same time, it is also necessary to use tools to regulate supply and demand for the market to develop substantially.
According to VARS, first, it is necessary to tighten discipline in planning, appraisal, approval and implementation. Competent authorities need to effectively use tools to establish and adjust planning, land use plans, and regulate supply by allocating land funds for housing development right when planning is made.
At the same time, people must have the opportunity to know and contribute to land use planning and plans so that land can be used for the right purpose, economically, and to maximize its “use value”.
Second, it is necessary to remove "suspended" planning and build a separate legal corridor for land trading in planned areas. At the same time, it is necessary to strictly control the management experience and financial capacity of contractors to ensure project progress, avoid financial loss and waste of resources.
The greater the speculative demand, the more it is out of control, the higher the real estate price will be, fluctuating with large amplitude, reducing people's access to housing. Therefore, it is necessary to study the option of applying a tax rate appropriate to the accumulated assets according to the quantity and scale of real estate owned to reduce the motivation for speculation.
In addition, there should be credit policies to limit speculation such as applying higher interest rates when buying a second, third, etc. property.
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