Stop virtual land fever

The real estate market in 2021 is considered an attractive investment channel in the context of the economy being greatly affected by the COVID-19 pandemic. However, land prices are boiling everywhere, in some places land prices even increased 2 to 3 times in just 1-2 months due to rumors of projects in localities, causing the risk of virtual land fever to increase.

It is worth mentioning that land fever is not a new problem but has been repeated for many years. Up to now, land fever is still a pressing issue and the risk of a real estate "bubble" bursting is still looming if not resolved.

Mr. Nguyen Van Dinh, General Secretary of the Real Estate Brokers Association said:

-The recent outbreak of local land fever in some provinces and cities has made land prices difficult to control in the market. In your opinion, what is the main cause of these land fevers?

-It can be affirmed that the first reason is supply and demand. We have seen a whole series of processes from 2019-2020 until now, the situation of project development has not improved much, leading to a very limited supply into the real estate market. Meanwhile, the demand, according to our assessment, is very strong, especially it has risen from 2019, 2020 and spread to 2021.

Along with the demand of the real estate market, there is a new demand, a new force participating in the real estate market originating from the economic situation in Vietnam with many sectors declining, ineffective investment, causing investors to withdraw money from other production sectors.

At the same time, bank interest rates are currently at a very low level, profits from deposit interest are lower than inflation, causing investors to look for more suitable investment channels; including stocks and real estate.

In particular, with the context of insufficient supply, it often leads to a shortage of goods, especially genuine goods, "beautiful" goods of the real estate market, causing prices to increase every day. In addition, the tricks of many speculative groups, creating "real estate flea markets" in all areas with planning information to create scenes of buying and selling, snatching, and increasing prices every day.

These are all tricks that many gullible, inexperienced, and ignorant investors fall into.

-In addition to the above causes, are there any causes from the current policy mechanism, sir?

-Current policies have many problems that make it difficult for many provinces and localities to approve and develop official projects, creating supply to meet market demand.

Besides, current buying and selling and trading activities are also difficult to control, especially tax regulations on investment real estate which is not really an investment but just for holding.

Payments must go through the banking system to control transactions, avoid tax losses and handle issues of inappropriate use of resources that do not comply with legal regulations.

-The real estate "bubble" and land price inflation cause many unpredictable consequences, putting investors at high risk. What is your opinion on this statement?

-It is true that there are many risks. Unprofessional investors who lack knowledge when participating are at risk of buying virtual real estate, real estate that is not in accordance with the law and may lose everything.

In case that area has economic development, the land value they are participating in the transaction may have to be recalculated due to additional taxes, land use fees, land rent... Overall, the investment may be a loss.

In less fortunate cases, the real estate they invest in falls into public planning such as transportation, the land will be reclaimed and the investor risks losing everything.

As for legitimate investors, developers who comply with legal regulations when investing in transport infrastructure, urban infrastructure, industrial infrastructure to develop the economy of an area, they face a huge barrier: increasing land prices. At that time, the possibility of compensation costs will be very large and there is a risk that compensation and clearance will not be possible.

This will prevent investors from participating in the economic development of the area, which may lead to the area not developing economically. And if there is no economic development, the land in that area will completely lose its value. This is a big risk for both small investors, formal investors as well as local and state authorities.

-Such high land prices will lead to the bursting of this "real estate bubble", sir? What is your prediction about this situation?

-In terms of market principles, prices that increase or do not increase according to the real value of investment activities in social infrastructure, technical infrastructure, and urban infrastructure are of course virtual. And if they are virtual, land prices will certainly increase every day and at some point they will no longer be able to increase, and will stop.

At that time, all trading activities will cease and the demand for liquidity and withdrawal of investment will not occur. The market will certainly fall into a state of collapse, leaving huge consequences, especially for investors using credit leverage, those who have mortgaged their houses and withdrawn investment money into this virtual market.

-What advice do you have for those who want to enter the real estate market at this time?

-Investors should not participate in markets with virtual phenomena, "feverish" prices, unofficial markets, and markets that do not comply with legal regulations. They should research projects that have sufficient legal regulations to allow them to be put into the real estate market for transactions.

-In fact, the market has had many land fevers like the current one. So, in your opinion, what solutions are needed to avoid repeated land fevers and price "inflations" like the current one?

-First of all, in the short term, local authorities need to take drastic action in markets where there is information about planning announcements or infrastructure development, economic development. They must have scenarios ready so that when the planning is announced, they can control investment, business, land and real estate trading activities that are not in accordance with the law.

As for the long-term solution, one is to urgently amend and adjust legal regulations so that projects can bring to the market a supply that meets demand. When supply matches demand, the market will be balanced.

Second, there must be solutions to control cash transactions, especially for high-value real estate products through the banking system, to avoid tax losses.

I think if we synchronize all the legal regulations, we will control the real estate market.

Thank you very much!

According to VNA