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Confidence – Decisive Factor for Property Market Recovery

The real estate market has been frozen so long; since 2008, housing prices have fallen significantly. Many investors had no choice other than leaving the market, losing part or all their investment capital. However, there now appear some positive factors helping to recover the market.

 

According to CBRE, a top commercial real estate services provider, the third quarter of 2014 witnessed several launchings and offerings. A total of 2,202 new apartments were put for sale, most of them came from the low-end segment, making the total new supply in the first 9 months 6,829 apartments, higher than 6,745 new apartments offered throughout 2013.

 

 

Second half is good time for home buyers

The real estate market witnesses a rush – a wave of rocketing price and trading volume – every 7 or 8 years, according to the Ministry of Construction. The three previous rushes in 1993, 2000, 2007 mainly occurred in large cities. As such, it is most likely that the period 2014-2015 will witness another rush.

 

Dr Le Xuan Nghia, Vice Chairman of the Financial Supervisory Commission, National Institute of Research Business Development (BDI) also advised choosing the right time when investing in the real-estate market which could limit risks of investment. If those do want to go back to the market, the most appropriate time must be the end of 2014.

 

Recovery signals can be seen clearly in the greater number of successful transactions and the rise in prices. In the early months of 2014, the number of successful transactions doubled over the same period in 2013 as real estate prices fell to the lowest point. Policies to stimulus the housing market adopted by the government, such as extending housing loan channels, lowering interest rates, performing a support package of VND30 trillion also supported for the recovering process of housing market. As a resonance, the price of gold went down sharply so many investors sold gold to buy land.

 

Analysts, economists and investors both agreed that the housing market has gone through the dismal bottom line. The in-progress projects are boosting to catch up with new investment trends.

 

Mr Richard Leech, Managing Director of CBRE, said middle-class projects were becoming proactive with great promotions such as offering furniture or car and a deferred payment policy because most of the projects are completed and customers can use them immediately. As many as 2,550 apartments were transacted in a quarter, an increase of 2 percent compared with the second quarter of 2014. "Regarding the low segment and medium segment, the market witnessed a slight increase from 2-5 percent over the previous year on the sale price in a few new projects, especially for those which have been completed. Despite promotions with great value, the above price increase also suggested that investors are more confident in the market”, Mr Leech said.

 

Bottom line left behind

People once rushed to buy apartments in spite of price and quality. Risky investments led to their losses and a serious market downturn from 2008 to present.

 

Investors nowadays pay more attention to the price and value of the land, apartments except those in need or those who have spare money to buy houses and lease back. This is a safe investment channel with higher profits in both the short and long term.

 

Although the apartment is used for any purposes, it must be guaranteed to be a good investment, which means the value of apartments increases over time. To achieve this requirement, the apartment's location is a key element to review. An apartment which is labelled “advanced”, but located among a field with underdeveloped infrastructure and lacking connectivity with urban lifestyle is difficult to raise prices. Other important factor is the quality of construction. If the apartment is rapidly downgraded, it is at risk of losing price as well. In addition, residents of apartment buildings also require worthy premium services.

 

According to CBRE, the resale price of secondary flats increased slightly by one percent over the previous quarter. Prices improved in most segments, especially intermediate segments with 1.8 percent over the previous one (in the first and second quarters of 2014, secondary prices greatly increased in high-end segment). However, according to Mr Richard Leech, although secondary prices have risen in three consecutive quarters, the full recovery of the market also needs other signals such as an increase in transaction volume and the confidence of customers and investors. At this time, it can be said that the market has bottomed out, however, further observation is needed before concluding its full recovery.

 

Source:VCCI– Thanh Thao