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House price growth is 2 times faster than income of Vietnamese people
29/08/2019 10:31 | Source: Vnexpress
Between 2016 and 2018, it was hard for Vietnamese people to buy real estate with accumulated money as land prices rose too fast.

Huynh Phuoc Nghia, Deputy Head of International Business - Marketing Department at Ho Chi Minh City University of Economics, said that he conducted a quick survey on real estate price growth in the three-year “land fever” and the current decade. 

Accordingly, between 2016 and 2018, when the land fever spread throughout the country, people could not create accumulated cash flows to buy real estate because the speed of making money was too slow compared to land price increases. In the past three years, the land price has risen at the lowest rate of 1.5-2 times and the highest at 3-4 times. During this period, if the Vietnamese just save money and expect to increase their income, the dream of home ownership is impossible.

Vietnam real estate market

The expert assessed that the majority of Vietnamese bought real estate in the 2016-2018 period by changing their cash flow from business, production, financial investment into real estate. In special cases, real estate speculators easily owned and exchanged properties in the land fever thanks to the accumulation of sudden cash flow.

The survey also shows that over the past 10 years, from 2009 to 2019, the value of each sqm of land surged in the range of 4-10 times depending on each area. This is also a special period to witness a strong change of the market when it witnessed full shades, from cool to hot and then slow down.

The growth rates of 4-10 times in a decade are considered unsustainable and accumulating price bubbles. However, the paradox still occurs when the prices kept skyrocketing, constantly setting new peaks but still being accepted by the market.

Nghia said in fact, the housing price bubble has a special relationship to the deceleration of real estate in 2019. This is a test of market durability. If the real estate price bubble is too large and constantly inflates, it can lead to many consequences.

First of all, the people’s opportunities to own real estate of the people increasingly narrow, causing social tensions. Next, the real estate price bubble restrains the development of manufacturing industries. In addition, the bubble also pushes up the cost of business/production premises, affecting the prices of goods and services and causing uneven development of the economy.