Growth of real estate market raises concerns over increasing house prices

The real estate market has spectacularly surpassed two years under the impacts of the Covid-19 pandemic. While many fields have suffered because of the epidemic, the real estate market has robustly grown with abundant capital inflows.
Growth of real estate market raises concerns over increasing house prices ảnh 1 Illustrative image. (Photo: SGGP)

By the end of the third quarter of this year, real estate credit rose by about 6 percent compared to the end of last year. The total outstanding loan for real estate was about VND2 quadrillion, accounting for about 19 percent of the total outstanding loan of the economy. As for FDI sources, by the end of November this year, the total newly registered capital in real estate also reached nearly $2 billion, accounting for about 11 percent, ranking third in the fields of FDI attraction. In terms of bond issuance, real estate enterprises also topped the list.

According to the forecast, the real estate market will continue to grow with many new motivations in 2022. First of all, the supply of the apartment market is forecasted to double in volume compared to 2021. That of land-attached housing will also surge by 20-30 percent. In 2022, the market will see good signals, thanks to positive information from the socio-economic recovery and development program in the next two years.

Specifically, the Government and the National Assembly are meeting to agree on a package of about VND60 trillion - VND65 trillion for housing development, which is forecasted to be an excellent spur with a relatively favorable interest rate, possibly about 3-4 percent lower than the current market.

In addition, the Ministry of Construction has been playing as the focal point to ask for the Government's approval of the Housing Development Strategy for the 2021-2030 period. The foundation of real estate trust funds, housing savings funds, and housing development funds are also paid more attention.

However, the recent strong development of the real estate market has also raised many concerns when housing prices have continued to climb, especially apartment buildings, whose prices have exceeded buyers' affordability. In Hanoi and Ho Chi Minh City, apartment prices have increased by 10-30 percent. In many localities, speculation and market manipulation have been causing land prices to rise sharply, many times higher than the real value, even at unreasonable prices of up to billions of Vietnamese dong per square meter in some places, making the market unstable and risky.

For the real estate market to develop healthily and reflect the true value of products, as well as the supply-demand relationship, the Ministry of Construction and relevant localities and agencies need to keep a close watch on market developments, promptly detect, and handle negative problems from the moment they arise.

Reviewing the land fund and housing fund, curbing the building material market, and providing accurate information on the planning and implementation progress of projects can also help the market develop stably. The relevant ministries and sectors need to continue to complete the legal environment, in which the focus is on amending the Land Law, the Housing Law, and the Real Estate Trading Law.

The market growth is a good thing, but prices must be strictly controlled, especially when the housing targets remain unachievable.