Real estate recovery depends on public investment
Market experts believe that there are signs that the real estate market is recovering gradually, after being dormant for a long time, and will further be pushed by public investment in the future.
Speaking with Saigon Investment, Mr. NGUYEN QUOC ANH, Deputy CEO of Batdongsan.com.vn, said that the negative impact of the fourth wave of the Covid-19 pandemic has lasted only for a short time but has had devastating effect on the real estate market.
JOURNALIST:- Sir, do you think real estate prices will soar again after the market begins to make a recovery after lying dormant for several months?
Mr. NGUYEN QUOC ANH: - The real estate market does not typically recover as sharply as manufacturing companies. Recovery happens gradually in stages and a rather massive influx of cash is needed for the recovery of real estate companies.
The fourth wave of the Covid-19 pandemic has been far different and more damaging than the first one. The impact of the first wave was not as devastating as it was this time. Also, the strong effects of the fourth wave have seriously prevented the cash from flowing into the real estate market. There was a rise of real estate prices last year, which will also make it difficult for a price hike in the fourth quarter of 2021 and the first quarter of 2022.
Financial difficulty is a common problem in real estate companies. Some big companies have issued corporate bonds (CBs), but not many companies can do the same. Looking at bank loans and CBs, I suppose the real estate market is still safe. The government is still taking a very cautious approach, and strict control over real estate credit which somewhat affects the demand for real estate.
However, this is not too much of a hurdle because sustainable development of the real estate market should depend heavily on customers' needs and specific products. For instance, public investment in urban planning and construction of roads and bridges could drive the economy up in a large area and cause the price of real estate in that area to skyrocket.
Nevertheless, this depends very much on the speed of investment capital disbursement, because a slow disbursement does not result in much actual work, and unimplemented projects could cause real estate prices to remain unchanged. Real estate prices could remain unchanged even when a project is under construction; and prices could only rise when the project is put into operation, increasing the value of the product in that area. The recovery of Hanoi will happen this month while Ho Chi Minh City may see recovery next month, yet Ho Chi Minh City will experience a speedier recovery since it is the hub of the real estate market.
-Sir, the Evergrande real estate debt bomb in China has shaken the international market. What do you think the Vietnamese real estate market can learn from it?
- I strongly believe that the case of Evergrande has a lot more to do with things inside China, where change of policies plays a more significant role than market factors. In fact, the Chinese real estate market has been growing too rapidly, creating lots of risks and negative effects on the economy, forcing the Chinese government to take drastic action in an effort to keep the economy under control.
The situation in Vietnam must also be seen on whether the supply of real estate products meets the demand in Vietnam. Actually, over the last two or three years, credit institutions have kept strict control over real estate loans and the Covid-19 pandemic has caused catastrophic effects on the economy, badly hurting the supply of real estate products. Since 2019, the real estate market has been short for cash, especially after the Government started to review all the legal aspects of projects.
Therefore, it is not true that superfluous supply of real estate products in Vietnam has resulted from excessive construction like the situation in China. The demand for real estate products is enormous in Vietnam. It is estimated that urbanization is rising on an average of 1% per year, and Hanoi and Ho Chi Minh City will need 70,000 to 80,000 apartments a year, which means a great demand is still growing.
-Sir, what real estate segments do you think will benefit from the recovery of the market in the near future?
- The recovery of the real estate market will drive the main segments like housing, land and apartments. Yet the apartments segment may vary from area to area. For example, this segment in the South may have greater potential for growth than in the North, because the supply of apartments in the North is enormous but the prices remain flat.
Industrial real estate products will recover as production gets started again. Tourism and resort real estate products could see harder times. This has been talked about a lot, but investors are under pressure of commitments to implement the projects and sell the products while investment capital is insufficient. Analysts may say that lots of people will travel again after this wave of the Covid-19 pandemic is over, and it will be easier to sell tourism real estate products. However, this is just an expectation, and a full recovery cannot happen overnight.
-Sir, there has been concern that Foreign Direct Investment (FDI) in Vietnam will be affected by the Covid-19 pandemic. What do you think FDI in real estate is like now?
- I think the FDI flow into real estate has been affected little by the Covid-19 pandemic. In fact, FDI is a kind of long-term capital, and foreign investors make their investments in Vietnam based on several factors. The first factor is the real potential of the country in which they make their investments, the next are incentives and interests and policies on problem solving and political stability. This means they look at the situation over a period of five to ten years.
For real estate investors, an epidemic or pandemic is a short-term factor while they consider long-term factors, so the FDI flow is still fine. We can see a number of big FDI projects were launched in the third quarter of 2021.
Quantum Group signed an investment contract with a Vietnamese joint venture, Kinhbac City Development Holding Corporation (KBC) and the Saigon Telecom Technology Joint Stock Company (Saigontel) for a number of projects worth USD 20 to 30 bn; and Nestlé announced an investment of USD 132 mn for the construction of a new plant in Dong Nai Province over the next two years. The South Korean giant Samsung Group invested USD 220 mn in a research center in Hanoi. The project is about 50% complete and is expected to be operational in 2022. LG Display Project in Hai Phong City has also planned to increase its capital by USD 1.4 bn this year.
- Thank you very much.
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