Where will capital flow?

As the real estate market is on the decline, cash flow will shift to other investment channels, analysts say.

The sharp rise in land price in 2016-2018 prompted investors to rush to buy real estate.
Many people got rich thanks to investments in real estate over the last two decades.

Where will capital flow?

However, many others lost all of their money because they poured money into land. The investors, who bought real estate in 2006 and sold it in 2008 made fat profit, while those who bought real estate after 2008 took a loss.

Nhip Cau Dau Tu quoted analysts as saying that in the first months of 2019, the transactions of apartments, houses and offices in the central areas, valued at no higher than VND10 billion, were stable, while the other market segments such as land and suburban apartments valued at over VND10 billion saw liquidity decrease.

Some markets which saw hot growth in previous years, such as Phu Quoc, have cooled down. Though the price has decreased by 10-30 percent, many products are still unsold. 

The sharp rise in land price in 2016-2018 prompted investors to rush to buy real estate. Many people got rich thanks to investments in real estate over the last two decades.

Explaining the cooling of the real estate market, Dinh The Hien, a respected economist, said the State Bank’s policy on tightening the credit flow into the real estate market has made investors cautious. 

 

Meanwhile, commercial banks are undervaluing real estate which is used as collateral for loans. These factors are e oected to keep the market quiet in 2020.

As the real estate market is declining, the cash flow is predicted to change its directions to gold, foreign currency and corporate bonds. Meanwhile, cautious investors will think of depositing money at banks.

According to Huynh Minh Tuan from VnDirect Securities, the gold price has increased by 15 percent this year, which is relatively attractive if compared with the bank deposit interest rate of around 8 percent and corporate bond interest rate of 11-12 percent.

However, the sharp increase makes it difficult for investors to predict price fluctuations. Besides, gold is not the favorite investment channel for cash flow, so there won’t be many new investors in this channel.

Foreign currency is not a suitable investment channel at this moment as the dollar price is flat.

“Dollars are considered a shelter rather than a profitable investment channel,” Tuan commented.

The dong/dollar exchange rate is predicted to be stable until the end of the year thanks to the plentiful dollar supply brought by the trade surplus of $7 billion, strong FDI and overseas remittances.

Corporate bonds are attractive to many investors because of the high interest rates. However, analysts advised investors not to pour all money into bonds because of high risks.

Mai Lan 

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