Experts warn of oversupply while land prices appear to be rising

Hà Đông District in Hà Nội is among the areas most chosen by real estate developers. Several land projects in Hà Nội and HCM City are in the compensation and land clearance phase with high costs. — VNA/VNS Photo Tuấn Anh

HÀ NỘI - Real estate experts are worried about market stagnation, as there is an abundant supply, but land prices in major cities appear to be rising, making properties unaffordable to many.

Speaking at a conference on the sustainable development of the real estate market held in Hà Nội on Wednesday, Nguyễn Văn Đính, vice president of the Vietnam Real Estate Association, expressed his concern about oversupply and the possibility of transactions being slowed down.

The real estate market has seen good growth this year with new sources of supply, which indicates that the Government’s efforts to reform and loosen regulations have created positive impacts on the market, according to Đính.

However, there is a risk that land prices in some cities and localities will increase significantly, as their authorities have started announcing land prices and new land-use plans, he said.

For example, several land projects in Hà Nội and HCM City are in the compensation and land clearance phase with very high costs, which will potentially drive up investment costs and land prices.

"As a result, it might be very difficult to adjust real estate prices downward and they are showing signs of rising,” Đính said.

“In theory, when supply increases, prices should go down. But here we have a paradox, where supply has improved and prices are also rising,” he added.

“Overall, if prices are not adjusted, transactions will decrease and the market will stagnate, which is our major concern.”

He also said that although the absorption rate of the market had remained high over the last few years, increased prices would likely lead to stagnant capital flows and result in oversupply.

“The real estate market is in a transition phase, so it is highly sensitive to both positive and negative factors from stakeholders,” Đính said.

“Mild growth in some segments could create strong recovery momentum if supporting factors such as policies, infrastructure, and finances are met.

“However, the issue of rising real estate prices, if not intervened early, will have many consequences to the market and society."

To resolve this issue, he suggested that the Government could implement measures to facilitate affordable commercial housing and social housing projects and provide policies to help the resort real estate market recover.

Efforts from other stakeholders such as State management agencies, real estate businesses and brokers, are also encouraged, he said.

Chair of the Vietnam Association of Construction Contractors, Nguyễn Quốc Hiệp, pointed out that, to meet the public's housing needs, investors need to calculate and balance prices to ensure they are reasonable.

“The authorities should also adjust market prices through tax policies,” he said.

The rapid increase in apartment prices recently is partly due to the land price structure, Hiệp added.

This issue needs to be addressed by State management agencies, taking into consideration the perspective of the people who need housing, he said.

“To develop a sustainable real estate market, attention must be given to both supply and demand. Such a market will contribute to sustainable economic growth," Hiệp stressed.