Overview of the 2021 real estate market: Several unexpected scenarios
The year 2021 ends up with a series of struggles for the real estate market. The market continues to lose the balance of supply and demand, "land fever" occurs after each phase of the Covid-19 pandemic, many new mechanisms aid in opening up the market, and the auction of land in Thu Thiem (Ho Chi Minh City) reaches an unprecedented peak. Experts, however, remain optimistic about a rebound in 2022. Let's review the highlights in the real estate industry in 2021, as reported by Kinh Te& Do Thi News.
Investors are learning more information about a real estate project in Hanoi. Credit to Pham Hung
Land fever happened on a large scale
According to general data reported from the Vietnam Real Estate Association, from the North to the South, in the first months of 2021, especially in the first quarter, land fever happen everywhere, in all regions of the country, with the average increase from 30% to 100 %, for example, Hoa Binh (up 102%), Ba Vi - Hanoi (75%), Bac Giang (37%), Bac Ninh (28%), and Hai Duong (19%). Similarly, the southern provinces had witnessed an escalation in the housing and land market, particularly land plots, with Thanh Hoa (76%), Da Nang (32%), Kien Giang (38%), Ba Ria - Vung Ships (24%), and Ho Chi Minh City climbed by an average of 25%, etc. Particularly, some regions experienced significant growth of 150% -300 %, such as project land in Viet Yen, Yen Dung, Luc Nam, and other districts (Bac Giang province), which grew 2-3 times compared to the end of 2020.
Experts say the reasons for land fever are primarily due to three factors. The first one is that many investors anticipate planning information and infrastructure development, such as planning along the Hong River, some districts in Hanoi, Da Nang, and Thu Duc (Ho Chi Minh City) to be upgraded to the urban area, etc. The strong flow of foreign investment capital pouring into industrial development has increased demand for infrastructure, causing the price of land in many low-lying areas in many areas to skyrocket; additionally, land fever is caused by traders and land brokers blowing prices.
House prices soared due to escalating materials
According to Ministry of Construction statistics, the construction price index increased by nearly 4% in the first half of 2021 compared to the same period in 2020, with the key impact being an increase in the price of input building materials, for example, the price of steel increased by 30 - 40% (this increase is considered unusual), asphalt price increased by 9 - 10%, and cement price increased by 3 - 5%. Furthermore, By the beginning of the fourth quarter, the market had recorded a new increase in the price of building materials, with suppliers raising prices by 5% - 20%. According to some construction companies, they receive new quotes monthly, with prices jumping 2-3 times in some specific months.
According to a representative of the Vietnam Real Estate Association, price increases in construction materials have a direct impact on housing pricing. Specifically, the cost of land (which accounts for 15% of the cost of apartment blocks, 30% of the cost of townhouses, and 50% of the cost of villas); construction costs (materials, labor, equipment installation, and so on)account for approximately 60% of the cost of real estate construction, as a result, house prices in 2021 rise by 10-15% compared to 2020.
Real estate stocks thrive
Never before has Vietnam's stock market witnessed such explosive growth as in 2021. The low-interest-rate environment, the urgency to find new investment channels amidst a period of social isolation due to the Covid-19 outbreak, and the expectation of a high rate in return all contribute to stocks becoming the first choice of investors. The number of new investors has steadily increased, as seen by the record-high number of new accounts registered each month. The VN-Index, in particular, passed 1,500 points for the first time in November, setting a new high record. On the stock market, the real estate stock gained a lot of attention from the investors and became the market highlight. Although real estate companies' business performance is not very impressive, real estate stocks become appealing in the context of a massive cash flow into the market.
According to analysts, the appeal of real estate firms is not based on economic outcomes, but rather on the market's predicted improvement in the near future. Furthermore, a number of companies with huge land funds have been favorably welcomed by the market through recent record land auctions. Apart from the hyper-increasing stocks of CEO, DIG, QCG, HQC, PTL, SCR, ITA, and others, the market had seen many stocks at high levels, such as VHM, NVL, SCR, NLG, DXG, KDH, and others. About a month ago, real estate stocks increased by an average of 50% - 200 %, and several stocks are already trading ceiling levels of 100,000 - 200,000 VND/share. This "wave" shows no signs of losing heat, with several real estate stocks still encountering ceiling sessions.
Many policies impact the market
2021 is the first year to implement a series of new amended and supplemented laws and codes related to the real estate market, such as the Law on Investment, the Law on Real Estate Business, the Law on Housing, the Law on Environmental Protection, Corporate Income tax, and others combined with the Law on Construction (amended) to ensure the harmonization of the legal system related to the approval of investment policies, investor approval, and recognition of project investors (housing projects, real estate).
Along with that, a series of replaced, amended, and added Decrees and Circulars were published with the purpose of removing as many obstacles and barriers as possible for the business community in general and real estate companies in particular. Remarkably, The Circular 09/2021/TT-BTNMT has details and guides the execution of the Land Legislation, as well as several new points related to red books, which partially help resolve problems and shortcomings in the issuance of the certificate of land use right previously.
Decree No. 69/2021/ND-CP is about apartment building renovation and reconstruction, detailing the examination and assessment of apartment building quality, and creating and approving renovation and rebuilding plans. It also includes planning requirements for the renovation area or project investor selection. These new points are expected to fundamentally solve difficulties in order to enable the refurbishment of old apartments to overcome the policy's barriers. Decree 54/2021/ND-CP is on preliminary environmental impact assessment; Decree 25/2020/ND-CP removes real estate project "bottlenecks" in terms of procedures for handover of land to investors, who win the bid; Decree 68/2020/ND-CP specifies tax administration for companies with associated transactions, and Decree 49/2021/ND-CP replaces Decree 100/2015/ND-CP on social housing development and management.
The Ministry of Construction has also issued a number of policies to gradually improve the legal system for the real estate market, including Circular 01/2021/TT-BXD, which specifies national technical regulations on construction planning; Circular 02/2021/TT-BXD, which specifies fire safety for houses and construction sites; and Circular 03/2021/TT-BXD, which specifies national technical regulations on apartment buildings. Circular 06/2021/TT-BXD classifies construction works and guides their implementation in the administration of construction investment activities; Circular 07/2021/TT-BXD regulates local housing development strategies and planning.
Finance and banking expert Dr. Can Van Luc
The economy is forecasted to bound back speedily by 2022 if the economic recovery program, including the proposed VND 65,000 billion social housing credit package, is successfully executed. The housing development strategy is urgently completed by The Ministry of Construction to submit to the Government for approval; Public investment, particularly legal issues that have been completely removed recently. The Land Law will be amended in the shortcoming. The Government is also modifying the Decree on housing for workers in industrial parks and so on, which will benefit the real estate market.
Source: Doan Thanh/Kinhtedothi.vn
