Is a real estate stop-loss trend developing?

Ms. Nguyen Thi Hong Van, Associate Director, Valuation & Advisory Services at Savills Hanoi.

>> Real estate firms advised to catch up with green growth trend

Our reporter was given an interview on this topic by Ms. Nguyen Thi Hong Van, Associate Director, Valuation & Advisory Services at Savills Hanoi.

- Building material costs increased in 1H22, while bank credit and the issue of corporate bonds were tightened. What impact, if any, will this reality have in the near future on the property market, Madam?

As a result of the economic and political crises, property prices increased not only in Vietnam but also in many other nations in late 2021 and early 2022.

Regarding the Vietnamese real estate market, social distancing to combat the epidemic has temporarily halted housing construction, leading to a severe scarcity in the available supply of real estate and raising property prices.

The Vietnamese government, on the other hand, planned to regulate bank credit in riskier industries, such as real estate, at the start of 2022. This choice has decreased the amount of capital that has been poured into the real estate market, helping lower real estate prices in various locations.

Housing projects are launched, expanding the market's supply. As a result, the real estate market in Vietnam may not face price fluctuations as dramatically as it did in the past as a result.

- Is there, in your opinion, a real estate stop-loss in the event that investors are unable to pay the interest on loans?

Investors who make decisions without first learning about the real estate market may still suffer a substantial loss. This flaw can cause a variety of issues, including projects with planning or environmental issues such as being too close to power lines, graveyards, or other obstructions. These are a few reasons why the value of commercial real estate is low and the transfer process is complex.

If investors use high levels of leverage to carry out real estate investing, a stop-loss in the asset class may result to avoid loan interest. The economy of Vietnam in general and the real estate market in particular are now recovering from the epidemic period. Therefore, it is unlikely that there would be a sudden drop in real estate values and a trend of stop-loss in this market.

It is unlikely that there would be a sudden drop in real estate values and a trend of stop-loss in this market.

- What should investors do right now, in your opinion?

Due to both objective and subjective factors, there has been a period of instability in the Vietnamese real estate market. Investors should periodically assess the real estate market in order to make wise buying or selling decisions.

Investors who haven't entered the market yet should consider the prices and legality of the properties before making a choice. Additionally, investors should seriously examine financial leverage in light of the complex status quo to prevent repeating the "death on properties" scenario that has previously occurred.

>> Make capital source into the real estate market healthy

For investors who intend to sell properties now, they may need to carefully consider the purpose of the money earned after selling. It would be reasonable for them to pour money into more effective investment channels amid an internationally unstable economic and political context.

- What about the real estate firms, please?

Companies must aggressively diversify their sources of funding and consider alternate avenues including funds, M&A, and joint ventures in the context of tightening real estate financing. Risks would be reduced and market stability would be made possible by such a capital diversification.

Credit restrictions for real estate could lessen speculative stockpiling, swing trading, and inflated demand, which would make home ownership more accessible to potential buyers. However, businesses must contend with steadily growing land and material costs. This presents a challenge for the businesses and has an impact on the product's final selling price. As a result, the market for social or affordable housing continues to be open to investors who want to get involved.

Thank you!