How to invest when real estate market slowing down?
The Vietnam’s real estate market has clearly seen signs of a downturn in many segments since the beginning of 2018. So how to gain profit from your realty investment?
According to Tran Khanh Quang, General Director of Viet An Hoa Real Estate Company Segments with the clearest signs of downturn include apartment, landed house and resort real estate. The most noticeable sign is the declining supply, followed by slower market forces. The absence of “surfing” investors and the quiet secondary market are aslo other clear signs lately.
Quang says the beginning of Q4-2018 will be an important time to assess the improvement of market forces and look at the signs of slowing down. This stage is very important, helping investors observe the market to make investment decisions with softer prices than ones at the end of 2017 and early of 2018.
In order to face downturn period of the real estate market, the expert suggests four tactics for investors:
Firstly, hunt for products of people who are forced to leave the game. In the market downturn period, price typically slows down at a rate of 30% increase in growth period. Therefore, investors should buy products that are offered for sale urgently, at cheaper prices (about 20% cheaper than the market’s price). In this period, if the price drop occurs, the average reduction is normally from 10 – 15% per year.
Secondly, choose the most useful, practical products to invest, especially row houses with frontage. These are rare products which will surely see price increase in the future, just sooner or later. Apartment in city centre is also an appropriate choice.
Thirdly, prepare cash, because when the market decelerates, cash is the king. Investors should divide the investment by 50:50, or only invest half of the existing money. With the remaining half, investors can use when catching cheap products by identifying the hit points (reasonable price range).
Fourthly, in case that the slowdown lasts for more than 6 to 8 months, investors should withdraw money from real estate located far away from the center or poorly connected.
Quang says the scenario that real estate prices fall sharply like the crisis period 10 years ago is very unlikely, since context of the market at different times are not the same. Moreover, vacant land sites that are ready for deploy projects are increasingly scarce. Meanwhile, the legal procedures are also increasingly tight, and time to prepare the basket of goods is also longer than before.
However, the expert also notes that there is no market that always grows without a turning point. Thus, the peak season from now until the end of the year is the period to challenge the market’s deceleration.