The real estate price bubble is big but hard to break


In the past half decade, real estate prices have continuously increased, raising concerns about uncontrolled inflating prices, but according to experts, it is very difficult to burst.

At the beginning of the spring of Tan Suu and Covid-19, a rebound broke out and complicated developments, but despite this variable affecting people’s lives and the economy, experts believe that real estate prices are difficult to decrease, even still increasing.

The forecasts are based on the previous year, in the first Covid year (2020), property prices also increased abnormally during the two epidemics. Further, looking at data from market survey units in the past 5 years (from the beginning of 2016 to now), real estate prices still conquered new records, culminating in fever fevers. period 2016-2017 and the beginning of 2018.

Whether in normal or pandemic conditions, plentiful or scarce goods, high or low liquidity, real estate prices still rise sharply. Although many people are optimistic when asset prices escalate, many experts have begun to worry about the cumulative price bubble phenomenon, increasingly being inflated, threatening the sustainable development of the real estate market.

Exchange with VnExpress“The real estate price bubble is bloating but hard to break, this is a paradox, but justified in the context of fish,” admitted Deputy Dean of the Department of International Business – Marketing, Ho Chi Minh City University of Economics. specialties of the Vietnamese market “.

Mr. Nghia analyzed, first of all, let’s look back at why housing prices increased. There are many reasons: high input costs (mainly land funds) are difficult to create, financial costs are increasing, materials and labor costs escalate. Legal obstacles lead to a slow supply, the scarcity of new goods, causing prices to rise, continuously developing infrastructure, which also stimulates the price of assets to be pumped down by the rain …

Another subjective reason is that real estate developers and investors are racing to sell high prices. However, there is a group of more dangerous factors affecting the formation of a price bubble that investors’ expectation in this market is too large, even strong enough to be prevented.

Thu Duc City real estate market. Image: Quynh Tran.

“For the majority of Vietnamese, the real estate investment channel is the ‘golden chicken’. Or if they don’t see real estate as an investment asset, they still buy at all costs for the purpose of shelter and saving. This is the source of the abnormal behavior after that “, Mr. Nghia said.

In the past five years property prices have skyrocketed in an extremely large margin due to inflated expectations. The market picture is always viewed through an optimistic lens, some have a basis, but many expectations are only assumptions for the future. All real estate market participants expect an increase in property prices. Business expectations, secondary investors, speculators, customers F1, F2 … also expect.

Instead of using and exploiting the functions of real estate, real estate investors have a common characteristic that only sellers transact with each other. Specifically, the first seller (F1) sells to customer F2, then becomes the second seller to hunt for customer F3, who will be the third seller. This turnover is so popular that there are quite a few transactions selling to consumers (buy to use). Every seller of real estate sends expectations on a higher price, forming the concept of expected price. If the expectation is too much, it means that real estate prices are inflated too quickly, which will accumulate into price bubbles. If the balloon becomes too large, it is dangerous because it can lead to rupture (collapse).

According to Mr. Nghia, the biggest paradox is that the real estate price bubble is expanding but difficult to burst. Because although asset prices have escalated for half a decade, there has not been a price shock yet. To make it easy to imagine, the price shock is the expected price collapse, which means that the real estate price is screaming high, no one will buy, the seller has to lower the price because he wants to discharge, but it is still difficult to find the final buyer to sell. remove (sell loss) to get out. This phenomenon has not happened in the market in the past 5 years because even when selling at lower prices, investors still make profits. The fact also proves that new projects offering record prices compared to the regional price level still have buyers.

“At present, the possibility of a housing price bubble bursting is not possible because asset holders are determined to embrace, keep prices high, and are willing to accept delayed transactions to preserve expected prices. In other words, the The owner of the property, the sellers who have not yet fallen into a secret situation, have to sell off “, Mr. Nghia explained.

Deputy Dean of International Business – Marketing University of Economics Ho Chi Minh City warns, when the housing price bubble swells, it is time not to be subjective. Because once the price bubble collapses the consequences are very unpredictable. The over-inflated property price bubble will not contribute anything to the development of the economy, or even worse. When you have to spend too much money on real estate, you will lose investment costs for creativity and gradually lose opportunities for reinvesting in the economy. Even social security instability also occurs because housing prices are too high.

Mr. Nguyen Loc Hanh, General Director of Ngoc A Chau Company confirmed that real estate prices in many places are increasing abnormally in 2020, despite having increased for many years, leading to the risk of price bubbles forming. very big. However, it is difficult to measure the risk factor or capture the housing price bubble for the whole market because real estate is very local.

The signs to identify a price bubble are price comparisons (because price fluctuations differ from place to place), and liquidity must also be considered. The optimistic assumption that someone will always be willing to buy real estate for sale in the market at record high prices and regardless of the real value of the property, the question arises as to how many real deals are there. success. When you see the price rise, worry about the price bubble, look at the threshold of liquidity. If the price is high, the liquidity is also high, it means that the growth cycle is not over yet. If the price is high, liquidity is low or no one is buying, it is possible that a price bubble has started to appear.

Mr. Pham Lam, CEO of DKRA Vietnam, said that the rise in real estate prices is a sign that the real estate market is still in a growth cycle. Instead of worrying about a property price bubble, let the market regulate it.

The DKRA CEO explained that the market operates according to the law of supply and demand. When supply and demand meet (successful transaction), that is, the price no matter how high or expensive is accepted and this is the real price, also known as the market price.

A real estate price bubble only happens when a property is sold and no one buys it, also known as a virtual price. Although real estate prices rise mainly due to expectations in the future, only those with a solid foundation drive the growth. “Let the market speak up for itself what is the real price and what is the bubble price”, Mr. Lam said.

Minh Le

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