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Figuring out the bottom of the real estate market   2008-11-06 - Viet Nam Net

Some people believe that the bottom line of the real estate market is the investors’ wholesale price. Others say that the bottom line is made up of the real estate prices before the market caught ‘fever’’ at the end of 2007. Meanwhile, other people say that the real estate market does not have a ‘bottom’.


It is very dificult to figure out the bottom of the real estate market

Tran Viet Dung, the Director of the HCM City Branch of Togi Real Estate Corporation, thinks that the real estate market will have to decrease even further to reach the bottom.


Dung, who is an expert in real estate assessment, said that with the current sale prices, real estate investors can still earn a high profit. Dung affirmed that real estate prices have far exceeded the price levels at the time when investors began selling their products.


Therefore, he believes that though real estate prices have decreased by 40-60%, it would need to drop by a half of the current price to reach the bottom.


Le Van Nam, an investor in the Tan Binh district of Ho Chi Minh City, thinks that the real estate bottom is the price level before the price fever at the end of 2007 and early 2008. However, Tran Viet Dung, another investor, did not agree with this opinion, saying that similar fever attacks were also seen in previous years, such as 2005-2007.


Some other investors believe that the bottom line of the real estate market is the initial prices at which real estate developers sold to clients. However, the director of a real estate firm said that it is unreasonable to refer to the initial prices, because the prices were set in 2006 when gold and construction material prices were much lower than they are now


Dinh The Hien, MA, Director of the Applied Economics and Informatics Research Institute, said that he believes the market does not have a bottom.


“The bottom price of the market is the price level at which real estate is sold, though the price may make investors suffer losses,” Hien said.


How to revive the real estate market?


Associate Professor, Dr. Tran Hoang Ngan, Dean of the Banking Faculty at the Ho Chi Minh City Economics University, said that rescuing the real estate market needs to start with the monetary policies. He said that banks need to open their doors again to real estate developers


Ngan’s idea coincided with the opinions heard at the working session between the Ho Chi Minh City Real Estate Association and the National Finance Supervision Committee. At this meeting, the bankers said that they would resume real estate credit.


Dang Van Thanh, Chairman of Sacombank, said that businesses should not expect too much from banks; however, he said the bank would do any thing it could to help the real estate market escape from its current situation.


However, Hien does not think that pumping more money into the real estate market is a good idea. He said that the fight against inflation has brought some initial results, and that injecting money in the market right now would defeat the previous efforts made to curb inflation.


Hien said that one of the problems of the real estate market is the high prices. Injecting money into the market will keep real estate prices too high for the majority of people.


He said that real estate prices need to go down. Real estate prices in the US have increased by 57% between the years 2002-2007, and the prices have dropped below the 2002 prices. In Vietnam, real estate prices have increased by 500% during the same time period.


Hien said that the Government needs to think of other measures rather than pumping more money into the market. For example, he said, the Government can buy back the losses or unprofitable enterprises at reasonable prices.


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