House, land: Unpredictable consequences behind the "virtual fever"

By Viet Sang - Jun 30, 2017 | 04:33 PM GMT+7

TheLEADERThe spiral of "virtual land fever" in Ho Chi Minh City is "sweeping" on a large scale. If not being cautious, citizens and investors are swept into the spiral that causes severe financial losses and unpredictable impacts on the real estate market.

House, land: Unpredictable consequences behind the "virtual fever"
Virtual land fever passing through will leave huge losses. Photo:

The real estate market tends to "cool down", but real estate prices are still very high. At many areas, the land prices are still "towering high" as District 9, 12, Thu Duc etc..

The land fever

Over the past year, foundation soil prices have increased by more than 30%, especially in some areas there has increased to less than 100%. For example, the foundation soil in Binh Chanh district has reached around VND20 million per square meter; The price of one foundation soil in Can Thanh Town, Long Hoa Commune (Can Gio District) is up to 10-12 million VND / m2.

In Thanh Xuan ward, District 12, when we came to learn about the past land fever, Mr. Huy, a stork, enthusiastically introduced: "The location of this plot is near 25Thanh Xuan Road, widen road, so 450 million a foundation soil is quite cheap price. The price of foundation soil here is increasing rapidly; you should choose to buy immediately. Yesterday there were five people to buy five soil foundations. You had better buy immediately if not, you will miss it tomorrow.

Mr. Huy continued: "You keep buying with just 50 millions of deposit, next month, after you pay money, you will receive the land use right in hand. The investment for this land will bring you Huge profit. Within a month, you can earn tens of millions dong for per soil foundation."

In Da Phuoc commune, Binh Chanh district, the land fever also entailed a force of land brokers and the largest concentration of speculators. A land broker named Nghia said: "From the beginning of this year, thanks to the land price fever, I have also earned a large sum of money.”

Mr. Nghia revealed that last week, he introduced the man to buy a plot of land valued at 1.2 billion dong with deposit of 100 million. This early morning he just sold it with1.4 billion dong. The man promised he would give him 20 million when he finished this contract. "Just finding out some real customers, you can earn more money through out money deviation. Sometimes, the deposit is just 50 million dong, but the next day, we can sell the land with hundreds of million dong. You will receive from 5-10 million dong Money from being the land broker, "Nghia said.

Le Hoang Chau, Chairman of the HCM City Real Estate Association (HoREA), said that this land price fever was influenced by the strong development of urban infrastructure, Metro lines, highways, connection routes etc. Thereby, it causes the increase of the price of real estate, especially in the East, the South and the West of the city.

Moreover, the public orientation of authorities has not timely lead to unpredictable consequences. In addition, the rumors have appeared all the time. It includes that Binh Chanh and Hoc Mon district will be higher level administrative units; there is establishment of "city-in-city" models in the East, West, South of Ho Chi Minh City; or large corporations disclosed the proposed information to build a very large project without the exact time of deployment etc, also contributing to the "virtual land fever".

Do not plunge into a virtual land fever

The land fever over time is caused by the development of urban infrastructure projects etc, the land brokers and terrestrial traders took advantage of the information to create a race to collect, push the price of land up. After heating up, the experts, investors and mediators warned strongly and from that land prices began to cool down. Many people buy the land for scalped purposes have to “bite the bullet” when the virtual fever gradually "cooled down".

In front of virtual land fever information, the HoREA continually issued warnings, in which including investigation information about the land speculators causing the land fever in the market. Previously, many real estate experts have advised that the "virtual fever price" of foundation soil would affect the market negatively. The distortion information brings potential risks and threatens the healthy and sustainable development of the real estate market. However, many people did not believe and still dream to get rich. Consequently, when the virtual fever has dissipated, they have to suffer losses as a matter of course.

In fact, to sell the products the land jobbers are willing to give the information "in heaven" to attract buyers. Once the product has been sold, they are no longer related to anymore.

"The customer will be hurt when believing in the land brokers and speculators because the speculators often have large capital, hold in their hands a large amount of land and want to create fever to push price up. Once the product has been sold, the speculators gain profit while customers and surfers have to beer a loss but they cannot do anything, "one expert said.

According to real estate experts, virtual land fever passing through will leave huge losses. The current land fever in Ho Chi Minh City mainly originates from the coastal area, because only this area has a large land fund. The virtual land fever will cause a continuous rise in land prices and the establishment of new land price level, which is one of the causes for the exaggeration of real estate. Money flowing into real estate is also getting bigger, to the point that can be a sudden deceleration or break down damaging the economy.

Theimpact of the virtual fever is that the market may soon enter a recession orcrisis. Depending on the resistance of the economy and the impact of externalforces, the down cycle will be short or long.