Will there be a Real Estate Bubble in Vietnam in 2022?

Although there are forecasts that inflation will soften in 2023, it is undeniable that in 2022, Vietnam’s economy is facing inflation risks. Meanwhile, the phenomenon of capital flowing strongly into real estate,creates the risk of a lurking asset bubble.

The global energy crisis, the trend of speculation and hoarding of strategic commodities by some big countries, etc. are factors that are creating great pressure for inflation in the coming year.

In the past 12 months, the price of oil has doubled. Along with that, the energy crisis has not shown any signs of abating. Many experts predict that the increase in energy prices will last until the end of the year because supply has not been able to keep up with demand.

Vietnam’s economy is considered to be facing inflation risks when the Government strongly implements measures to restore growth by loosening fiscal and monetary policies. In Vietnam, in mid-November 2021, the Governor of the State Bank of Vietnam forecasted that “inflation risk will be very high in 2022”. Nguyen Thuong Lang, Institute of International Trade and Economics (National Economics University), said: The Covid-19 pandemic has caused many obstacles to the movement of goods between countries and localities; pushing up logistics costs.

Ho Chi Minh City Skyline, end of 2021

The inflation index is forecasted to increase due to fluctuations in the economy such as stimulus packages being launched, public investment activities boosting, raw material and petrol prices increasing…

According to industry experts, controlling inflation in 2022 will be under great pressure, as many domestic commodities such as electricity prices, education and training service prices, and healthcare will be adjusted up, due to a decrease in prices. or not increase this year, at the same time, the world price of raw materials and petrol continues to increase.

According to the Ministry of Finance, from the assessment of high inflation pressure from the beginning of 2022, controlling inflation according to the target set by the National Assembly (continued at about 4%) will face many challenges and difficulties.

Dr. Can Van Luc, an economist, said that in 2022, production resilience, consumer demand, plus money supply will be stronger through the implementation of stimulus measures, fiscal and monetary support will put great pressure on inflation control. However, experts forecast that next year’s inflation will inched up to about 3.3 – 3.6%, the reason is that Vietnam’s economy recovers at a slower pace than some other countries in the world.

Risk of real estate bubble?

It can be seen that, in nearly two years of the Covid-19 pandemic, while production and business activities and services were stalled, the stock and real estate markets had many “suitors”. 

The stock indexes continuously made new highs with the number of investors participating in the market skyrocketing. Land prices in many places have increased, and land fevers in coastal areas, industrial zones, etc. have taken place in many provinces and cities across the country.

Explaining the hot rise of real estate in recent years, experts say that the main reason is that deposit interest rates are very low while new investment or business expansion is very limited, causing idle money goes into riskier channels.

Many industry experts believe that the phenomenon of land fever like in early 2021 will not happen in 2022 because last year the State has basically controlled it thanks to policies. However, one should not be subjective with inflation, so it is necessary to increase the cash flow in the real economy, directing cash flow into areas with high pervasiveness.

Mr. Neil MacGregor, General Director of Savills Vietnam, due to the Covid-19 pandemic, 2021 will be a year of many difficulties for the Vietnamese economy in general, and the real estate market in particular. However, this is also the year that affirms the flexible adaptation and innovation in the modes of organization and operation, as well as the support and reform efforts from the Government, to business units, to gradually recover.

“I feel that it is important for the Government to support the expansion of the supply of real estate to the market so that the real estate and economic bubble does not occur. Otherwise, prices will continue to escalate throughout the year. 2022 and the real estate industry will become difficult to reach even for home buyers, office tenants or investors in the industrial sector, “said expert Savills.

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