Should you invest in property or save your money this year?
Real estate investors should be cautious and keep their money idle till the end of 2023, insiders say.
Phan Cong Chanh, CEO of developer Phu Vinh Group, said the real estate market will pose more risks than opportunities for investors in 2023, adding that would-be investors should save their money instead of spending it.
According to Chanh, in the long term the market will benefit from rosy economic growth prospects, better legal frameworks and improved stock markets, especially the corporate bond market. But he said this would be gradual recovery that wouldn’t flourish to its full potential until 2-4 years from now.
The Central Institute for Economic Management put forth two economic growth scenarios for this year. Accordingly, GDP growth will either stand at 6.47%, inflation at 4.08%, export growth at 7.21% and trade balance at $5.64 billion, or at 6.83%, 3.69%, 8.43% and $8.15 billion, respectively.
With the draft amendments to the Land Law submitted to the National Assembly for potential approval in October, and amendments to other related laws such as the Law on Real Estate Business, the Law on Housing and the Law on Construction, also under consideration to potentially improve Vietnam’s legal framework, Chanh predicted that confidence in the real estate market would eventually rise to high levels in the 2024-2025 period.
But that means this year the market may remain tepid.
The market has big room for development in the long run thanks to Vietnam’s rapid urbanization, improved infrastructure, and high demand for housing amid limited supply.
However, the market cannot improve quickly over the next 6 months because flows of cash have yet to run smoothly, while well-off people are still hesitant to buy property amid the recent real estate market freeze, Chanh argued.
He said real estate investment opportunities in 2023 will appear in segments whose properties are sold for immediate accommodation or rent, not for profitable trading.
Chanh divided real estate investors into 4 groups and proposed action plans for them in 2023.
The first group is “surfing” investors who want to gain quick profits after a short period of buying and selling real estates. They will continue to hibernate this year.
The second group is investors who buy property using big loans (accounting for 50-70% of their value). They should restructure loans as soon as possible, Chanh said.
The third group is investors who borrow small loans (accounting for 30% of properties’ value). They should keep their best properties, the CEO recommended.
The fourth group is investors with money in hand (not using financial leverage). They should wait to start making transactions until at least the third or fourth quarter of the year ensure safety and secure profits.
Economist Dinh The Hien has predicted that the real estate market will likely show signs of a slight recovery beginning in the fourth quarter of this year, focusing on urban areas, zones around industrial parks and heavily-invested regions.
According to Hien, lending interest rates may gradually stabilize in the second quarter of this year. Exports are likely to continue to decline in the first two quarters of the year, but he predicted they would recover from the third quarter onwards.
The Vietnamese economy is expected to be basically stable in the last months of the year thanks to the positive effect of public investment, as well as financial and monetary stability.
This is the premise to support positive investment confidence in general and real estate investment confidence in particular during the last two quarters of this year, according to Hien.