Two scenarios for HCMC real estate market in 2020

Jan 30th at 08:57
30-01-2020 08:57:59+07:00

Two scenarios for HCMC real estate market in 2020

The Saigon housing market this year will depend on the resolution of the legal issues that plagued it last year, according to property consultancy CBRE.

 

Vo Huynh Tuan Kiet, associate director and head of residential project marketing at CBRE Vietnam, said this could either mean a continuing supply shortfall and escalating prices or a supply revival and competitive prices.

That would heavily depend on whether the legal obstacles are removed, he said.

In the first scenario in which the legal obstacles continue to persist, the market's supply would certainly be limited and therefore suffer from shortage. While the secondary market would be active, the risk of properties being overcharged would also be greater.

Many investors therefore would choose other investment channels or markets to look for more diverse opportunities.

In this scenario, real estate inventories would decrease as they would be gradually consumed due to lack of new supplies but housing prices would escalate and the city's suburban market might surpass the downtown market due to a shift of investment capital.

In the second scenario resulting from legal obstacles being cleared, the barrier of legal risk on the market would be removed, resulting in a surge in supply and a gradual increase to inventories.

The abundance of supplies would lead to more competitive prices as developers would no longer hold a monopoly and would have to sell properties at more reasonable prices in accordance with market mechanism. The secondary market would cool down as the abundant supply would result in a profit decline for the rental market.

Despite presenting these two opposing scenarios, Kiet predicted that it would be very difficult for the market to have a supply boom in the next 6-12 months. He therefore evaluated that 2020 would likely be a favorable year for developers who already have licensed projects that are ready to be sold to the market.

The secondary market would continue to warm up as the primary market's supply would still be limited while housing demand continues to increase due to buyers in the Millennials generation (born within 1980-2000).

2020 would be a difficult year for buyers as the market would have too few options while prices would still be rising due to limited supply, Kiet added.

Le Hoang Chau, chairman of Ho Chi Minh City Real Estate Association (HoREA), in late last year said that legal entanglement is the biggest reason behind the lack of supply, especially in affordable housing, which led to escalating prices.

He cited that between July 1, 2015, when the Housing Law came into force, and August 2018 up to 126 mixed-use projects could not fulfil investment procedures despite having in-principle approval. "They could not obtain approval for 1/500-scale detailed construction plans."

Moreover, since March 2017, under the prime ministerial direction, 150 housing projects involving public land have been put on hold for scrutinizing. "By February 2019, 124 out of the 150 projects had been allowed to operate but many of them are still facing uncertainties," Chau said.

According to an HoREA report, only 12 housing projects were approved in the first nine months of 2019 in HCMC, a 72 percent decline year-on-year. The report cited conflicting provisions in various laws regulating the sector making it difficult for developers to obtain licenses.

Nguyen Van Dinh, general secretary of Vietnam Association of Realtors (VARS), argued that legal troubles are nothing new but would continue to be a bottleneck for the market, especially since provinces and cities are reviewing and amending their land management regulations.

vnexpress



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