Following worries that the property market is entering a ten-year crisis cycle, a representative of the HCMC Real Estate Association (HoREA) said there are not sufficient grounds to conclude that a property crisis will recur.

HoREA says there are not sufficient grounds to conclude that a property crisis will recur

The property market declined in both supplies and numbers of transactions in the January-June period. In HCMC, the city’s housing supply dropped by 44.5%.

Supplies of high-end and medium-end segments declined by 25.9% and 32.6%, respectively, and accounted for 41.8% and 37.7% of total supplies. Meanwhile, the low-end segment saw supplies fall sharply, by 69.7%, and account for 20.5% of total supplies.

According to HoREA Chairman Le Hoang Chau, there is not enough basis to believe in a coming crisis, citing his research of two property bubbles in 2007-2008 and 2009-2011.

In particular, the growth of the gross domestic product (GDP) was 8.48% in 2007. HCMC’s 2007 GDP of 12.6% has also been a ten-year high since 1997, resulting in many enterprises and individuals making money easily, with real estate being a favored channel.

However, a direct reason concerns the loose credit policy, with credit growth in 2007 being over 37%. Large volumes of credit and capital were poured into real estate. Also, banks were not strict in their lending activities.

Further, there was an imbalance in the property market, with strong growth in the high-end segment. There was also a large number of secondary property investors and brokers, as well as frequent property price increases. Speculators inflated prices to levels much higher than actual values to make profits.

Meanwhile, competent management authorities did not make use of tax, credit and planning tools in time, or to effectively regulate the property market when there was signs of property bubbles during the previous crisis.

The property bubble in 2010 was also attributed to the investment stimulus package, whose size was some US$1 billion in mid-2009. A big proportion of this was used for incorrect purposes and spent on real estate investments, without being tightly controlled by commercial banks, according to Chau.

From such causes of property bubbles and actual market conditions, Chau said that a property bubble will not occur late this year or next year.

Offering market forecasts, Chau said the market will pick up in the final months of the year. The low-cost segment with affordable products will see strong growth and, together with the mid-end segment, will continue to dominate the property market.

Property developments in the high-end segment will focus on offering special features and integrated services. The building of smart residential areas, buildings and condos that use renewable energy, are friendly to the environment and guarantee safety and security will be favored.

New construction standards in Vietnam, which allow for construction of commercial apartments smaller than 45 square meters, will be issued in the near future. This will encourage investments in low-cost apartments, including rentals.

SGT