Collusion between brokers and distributors is skewing the market and short-changing customers, warn Vietnam’s real estate associations.
The Vietnamese property market is making genuine progress following stagnation issues which culminated in 2014. The progress may be skewed, however, by speculators stockpiling property in the hope of creating the illusion of limited capacity in some developments. Collusion between suspect agents and developers are being condemned by key real estate associations, who are angry that bad practice by the few is harming the reputations of its members.
The Sun Avenue Apartment (Novaland) in District 2
End-purchase customers are seeing prices jump by as much as 800mVND on a previously unoccupied residence as speculators manipulate the ‘early-bird’ market.
Mr. Tuan Anh, a real estate investment analyst, said: “Developers are keen to get buyers in as early as possible, and openly offer ‘first stage’ prices. Many of these are snapped up by speculators, sometimes even before the official selling period has begun, with the sole aim of selling the property during the second stage.”
Typical ‘early bird’ prices can begin at around 26mVND per square meter, while secondary offers begin at around 28mVND. Publically, the public and long-term investors are the intended beneficiaries of preferential early investment, but in reality short-term speculators are reaping the benefits.
“While this kind of speculation is frequent in every market, it’s unfortunate that developers are colluding with it by, firstly, promoting ‘early bird prices’ knowing the supply is more limited than their claims, and secondly, trumpeting early sales as a sign of a projects popularity. This is an artificial boost to second stage interest, and is quite discomforting.”
Too many brokers
Industry representatives echo this disquiet. General secretary of the Vietnam Real Estate Association (VNrea), Tran Ngoc Quang, is particularly concerned at the negative impact at a time – following the laws of July 1st – when efforts to attract overseas investors are showing early signs of success.
“Customers are being faced with a barrage of disreputable agents and bad practice, who are inundating enquirers – here and overseas – with repeated pleas to invest in property they know to be inflated in value.”
Approaches by text message are becoming a real cause for concern. One unhappy recipient, Mr Viet Dung of Hanoi, reports receiving “many messages from strange numbers at all hours of the day, even after midnight. It’s so persistent, and impacting my sleep, making me feel terrible.”
Electronic inboxes are flooded with equal frequency. Ms Thuy Hang, also of Hanoi, receives “on a regular basis 15 new messages each time I check my email, many of which offer adjoining or identical properties for varying prices. It really distorts any interest I had in the first place.”
One developer, who wishes to remain anonymous, distanced himself from such practices while acknowledging their impact:
“Value is high when demand is high. This kind of practice doesn’t generate demand for the market as a whole, and so disappoints us greatly. The problem is with individual brokers. For them, it works: they can send thousands of messages to unsuspecting would-be customers, and if they generate even 1 or 2 sales, they’re very happy.”
High brokerage costs
The overall effect is disorientating for would-be buyers. One such potential homeowner, Mr Tuan of Tay Son-Dong Da, is feeling pressured and misled:
“Every day, I get calls from brokers with different prices, most of which are ascending. Over the last 2 months, quotes have increased by as much as 3mVND per square meter. But it doesn’t take much digging to discover they are pushing apartments which have remained unsold the whole time. It’s bizarre.”
Estella Heights apartment will be opened to sell second stage in this month
The overall health of the market has been trumpeted recently. The first 4 months of 2015 saw the Ministry of Construction record 5850 transactions, 2.5 times the same period in 2014. April alone accounted for 1600 completed sales, a 10% rise on the previous month.
Though sales have genuinely seen an upturn in the last year, one Hanoian expert suggested the numbers were inflated by dubious means. “Distributors and brokers are responding to many queries with ‘sorry, sold out’, to create the impression of high demand and inflate short-term prices.” He went on to say “It’s a pointless inflation – we know these projects are making a healthy number of sales per day, but the announced figures are often magnified two or three fold. It’s unsustainable and will hurt their projects in the long run.”
All buyers are being subjected to such tactics, but fears are that foreigners and Viet Kieu (overseas Vietnamese) will bear the brunt as they are unfamiliar with the local market. All buyers are urged to work with reputable agents who are verifiable by trade associations such as:
Hanoi Real Estate Association
Ho Chi Minh City Real Estate Association
Vietnam Real Estate Association
Keep up to date with advice and information as changes to this emerging market take shape. If you have any question about Viet Kieu and foreigners buying property in Vietnam, get in touch today.
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