REAL ESTATE

THE PIVOTAL YEAR FOR THE REAL ESTATE MARKET IS 2022

Mr. Phan Cong Chanh, General Director of The D’edge thao dien for rent, believes that 2022 will be a pivotal year for the real estate market, the year in which the market will transition from a weak post-epidemic to a strong recovery with the support of macro policies such as public investment and economic stimulus.

How would you rate the state of the real estate market during the past year?

2021 is a year with a very unique macro context. Initially, the effects of Covid-19 caused a dramatic decline in GDP within a decade. The World Bank expects that Vietnam’s GDP for the entire year of 2021 will be between 2.0 and 2.5 percent. During the same time period, the unemployment and underemployment rates grew by 1.0 percentage point and 1.8 percentage point, respectively. In the third quarter of 2020, the average monthly real wage fell by 10.1% compared to the second quarter and by 12.1% compared to the same time the previous year, a substantial setback in the income recovery process that began in the second quarter of 2020.

Second, both monetary policy and governmental investment grew substantially. To address the economic recession, the government was compelled to implement fiscal policy (tax cuts and increased subsidies) and monetary policy easing. In particular, the Government is scheduled to conduct the economic recovery and stimulus programme for the year 2022-2023 with a budget of VND 660 trillion, in addition to the VND 500 trillion earmarked for public investment packages.

Lastly, investment cash flows seek protection. Difficult production and business, economic stagnation, and historically low deposit interest rates have caused domestic and foreign investors and individual investors to seek shelter in gold, securities, and real estate. This has not only prevented a decrease in product prices in these channels, but also caused them to increase significantly. An all-time high number of new investors entered the stock and real estate markets (F0). A monthly average of over 100,000 stock market accounts and hundreds of thousands of F0 investors seeking chances in the real estate sector. This is a fresh stimulus for the market as a whole.

In addition to the aforementioned three factors, the supply of real estate products in major cities such Vietnam Ho Chi Minh City and Hanoi has been limited for many years, resulting in a limited market supply. This also has a substantial impact on the supply-demand equilibrium of real estate products on the market, resulting in the market’s prices not only remaining stable but even rising dramatically. Simply because there is excessive money in circulation.

How do you see the market moving in the next two years?

During the epidemic, the market split into Ks. The rental real estate market was struck the worst, including retail space in commercial centres and front houses, flats, offices, and hotels. A poor year for resort property and tourism. The room rental rate occasionally drops to nothing, forcing many property owners to sell after years of struggling to pay bank interest and little income owing to the epidemic. The past two years have wiped out the preceding 5-10 years of profitability, putting the rental market in a “life or death” situation.

In the other direction, real estate values tended to rise due to societal cash flow movement, public investment, and economic stimulus packages. The market becomes delicate and unpredictable, with the winning price at the auction in Thu Thiem reaching over 2.4 billion VND/m2.

What are the opportunities for investors, businesses, and the market in a risky environment?

During Covid’s tenure, the housing market  faced a severe drought. The reduction in revenue and occupancy rates, coupled with the need to pay back bank loans, has forced many investors, enterprises, and the market into a corner. This is reflected in the rise in bank bad debt ratios over the last two years.

In this scenario, individuals and firms with tremendous financial potential and experience in project management, operation, exploitation, and M&A still have great chances. Many real estate transactions reveal the market’s rigorous screening. In the wake of Covid, a new class of property owners will emerge.

What risks will the market encounter soon, sir? What opportunities exist for individual investors to participate in the market?

There are three major threats in 2022-2025. The first is the increased danger of bank bad debt. As a result, banks’ financial safety ratios and risk management methods are put under pressure. However, reviving the economy and appropriate support from the Government and the State Bank can help reduce bad debts.

Second, liquidity risk. When banks are compelled to deal with bad debts, a sell-off scenario is possible but unlikely. Liquidity may be lost. But I think that scenario is temporary and can be remedied swiftly with the given funds.

The third is asset bubble risk. There are indicators of a property bubble building in the real estate market, and state management agencies must be closely monitored to avert this. The economy suffers from collapse.

The market is screening hard. To be able to engage in the market, real estate investors, especially new investors (F0), must have a strong and methodical knowledge, experience, and experience. a pro, not a newbie.

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