Real estate 2008: hot at first, cold at close
2008 is a strange year also because the market was very hot at the beginning of the year, and then very cold at the end of the year.
Market hot because of house purchase movement…
The end of 2007 and beginning of 2008 was an unforgettable time, when the HCM City and the eastern areas of the south witnessed an unprecedented land price fever. The real estate prices increased every hour, not every day. That explained why the sale prices were so different for the same real estate project and the same type of apartment but at different moments of sale.
Just within three months, from December 2007 to February 2008, the real estate price increased by 300%, and even 500% in some localities. A lot of real estate developers earned fat money from the thirst of the market.
The market was so hot that people had to jostle and scramble to get the right to buy apartments. Those who got the option to buy apartments at that time could pocket VND50mil at least if they re-sold an option to buy apartments.
The lucrative real estate market prompted people to inject money in real estate. People firmly believed that house prices would skyrocket further as Viet Kieu had been allowed to buy houses in Viet Nam. The prices of land, houses and apartments increased by three-fold at least, according to experts. The Him Lam-Kenh Te project land price soared from VND30mil per sq m to VND90mil/sq m within three months.
In the land price fever, investors only thought of one thing – trying to inject as much money as possible in real estate projects, while ignoring the warning about the high risks of the investments
. …and then cold because of tightened monetary policies
The land price fever in 2008 only stopped when the State Bank of Vietnam began applying monetary policies which forced banks to stop dispensing capital. The price fever just lasted for several months and only brought profit to some investors, but the consequences of the market’s falls will take a long time to repair.
In April 2008, one month after the tightened monetary policies began, the wave of fleeing from the market started, which has led to the continued price falls and brought loss to speculators. After six months of continued price falls, by the end of 2008, land prices had lost 50-70% of value in comparison with the highest peak.
The project land price in Phuoc Long A, Phuoc Long B, Phu Huu wards in district 9, HCM City, and Phuoc Kieng ward in Nha Be district saw its price drop from VND30mil/sq m to VND8-12mil now. The price decreases of apartments prove to be less sharp then the price decreases of project land. High-grade apartments, which were sold at $4,000/sq m at the hot market time, are now selling at less than $3,000/sq m.
The sharp falls of the real estate prices in 2008, for the first time, rocked the viewpoint which had existed firmly for a long time that investments in real estate only bring profit, never losses.
