The increasing interest in land has a host of supporting rationales. Industrial investment is also under rapid growth. Mr. Matthew Powell, Director of Savills Hanoi, advises investors to remain cautious about this phenomenon, and be aware of projects lacking legal transparency.
Increasing Demand For “Hotspots”
Effective pandemic control while retaining economic growth has put Viet Nam in an enviable position compared to most world markets. Investment demand is such the economy may open at the end of 2021. Personal equity growth is developing on the back of previous investments in Real Estate, or securities. Investment opportunities are being increasingly sought in outer areas of Ha Noi, other provinces, or new coastal locations. Investment growth in Industrial property continues, especially in Manufacturing. Market excitement leading to spikes in land demand may also be explained by improving and new infrastructure, opening up potential new development locations.
A similar pattern is being seen in some international markets such as China, or the UK. After enduring pandemic, a feeling of “light at the end of the tunnel” has been given further credence by increasing numbers of Savills brokered transactions in those markets. Investors with FOMO, or the “fear of missing out” continues, especially for those seeking assets whose performance has suffered under pandemic.
Real Estate Credit Control
Easy access to credit tends to encourage more borrowing. Credit in the Real Estate market is not a bad thing but needs to be tightly regulated. Uncontrolled credit may lead to short-term speculative investments leading to bubbles, which tend to collapse often leaving latecomers with excessive loss.
Mr Powell said “After 15 years in Viet Nam property, I have seen several Real Estate cycles with extensive attached speculation, especially housing in Ha Noi or Ho Chi Minh City. There were times when investors used financial leverage for “surfing investments”. The market becomes extremely active, but borrowers may lose their ability to repay. Easier access to credit can boost the economy but needs to be strictly controlled. However, the current level of housing sales still being based on personal equity greatly reduces any concern we have about credit activities”.
More Cautious Investing
If opportunities exist, an investment wave invariably follows. In every investment decision, basic considerations include: “Why does this property have potential? “Is it rumour or an official announcement?” or “When does the announcement come into effect?”
As projects are often announced early, to then take a long time to complete, investors should pay attention to official handover planning. Generally if something is too good to be true, it is not true. A general rule of thumb is not to make any investment decision which may be subsequently disrupted, or overruled, by later officially announced project updates. When investing, pay attention to your limit. Often investors continue investing if they see further prospects of profit. However, an understanding of the investment process and exit strategies are essential, and more simply, whether they can afford to pay for loans, or are able to hold-on to the property? The most effective investors develop pragmatic investment and exit strategies, and always keep a cool head.