Real estate favored as safe investment channel

Saigon Investment
(Saigon Investment) - In 2021, as also in coming years, real estate is forecast to be an important investment channel that will attract volumes of cash flow, amid a sharp drop in interbank interest rates. Only after the stock market, the real estate market is being favored by investors. 

Illustrative photo.

Illustrative photo.

Safe channel

The real estate market has experienced a turbulent year in 2020 due to the impact of the Covid-19 pandemic. Many segments of the market are almost paralyzed or completely frozen, such as resorts and tourism real estate. However, in 2021, analysts and investors are optimistic about a remarkable recovery of the real estate market, when growth momentum will once again draw cash flow of investors, as now the credit market is no longer attractive enough due to a sharp drop in interest rates.

Objectively speaking, investors still prefer to deposit money in banks, maintaining a safe mindset during this period of unpredictability caused by the Covid-19 pandemic. However, many investors have also been considering other investment channels such as securities, gold and real estate. In the stock market, a series of strong shock waves has led to more selling off of stocks. Although Vietnam has been highly successful in containing the spread of the pandemic within its borders, the continuing pandemic fear in Europe and the US remains unabated. People continue to worry that the global stock index not being stable.

Meanwhile, the gold market has been quite active, and gold is considered a good capital holding channel, not just an investment. Although the gold price has been increasing strongly, this market is quite unstable. The volatility of gold prices worries many investors because gold often plummets as the economy begins to recover. According to financial experts, when the deposit interest rate is high, investors will always choose to deposit money in the bank to enjoy both high and safe interest, but when the interest rate drops to only 5% or 6% per year, they are forced to search for investment channels with affordable products.

This is also the time to seriously look at profitable investment opportunities in real estate. Investors with long-term vision will choose to allocate cash flow firmly and real estate is always the investment channel attracting the strongest cash flow, so when the pandemic passes, there will be new opportunities.

However, in general, the real estate market this year has had a more positive impact thanks to lower lending interest rates, making investors boldly borrow to buy houses. On the other hand, the general economy is greatly affected, and the cash flow is difficult to procure. For real buyers, income is affected by Covid-19 pandemic, so not many people dare to borrow money from banks despite the low interest rates, and investors fear putting down money. Therefore, falling interest rates in principle have a positive impact on real estate, but it will be difficult to have a strong wave of investment as expected, but more towards safe investment.

Potential risks ahead

Cheap capital flow that supports production and business is undisputed, but many people suspect that the market cannot absorb it all because businesses and people are still struggling to operate normally again. The real estate market is no exception. In fact, so far it is not really clear how the ability to absorb idle cash flow of the real estate market will be. Apart from securities, some other investment channels, including real estate, have not seen many bright spots. The real estate market is less difficult, especially industrial real estate, logistics real estate, suburban land, housing in the mid-end segment with reputable developers, but in general the market has passed a period of hot increase.

Speaking with Saigon Investment, Mr. Nguyen Manh Ha, Vice Chairman of Vietnam Real Estate Association, said that at the beginning of the first quarter, there was still no idle cash flow in real estate as expected, because it depended on the supply in the market. Mr. Manh Ha commented that the supply in real estate market is still insufficient, price is high, so investment and speculation continually occurs. He feels that the segment that will attract the current cash flow is mainly land and the housing and apartment segments will not increase much, therefore profits will be limited and investors will reduce, and if you buy a house it will not be possible for long-term speculation like ground land.

Professor Dang Hung Vo also believes that the land plot will be the segment to absorb the idle cash flow by attracting investors. He feels that land plots will be an attractive segment for investors and they will just buy and leave it and wait for prices to rise before selling as they don't need to invest in any renovation. However, he also feels that both investors and businesses are very fond of land plots because the investment capital is usually lower than other segments, such as for example, to spend VND 1 billion to buy an apartment will be difficult, but buying land for speculation at that price is still available. Nonetheless, Professor Dang Hung Vo believes that land is also a segment that has distorted the real estate market for many years. He feels that it is not just investment, but used to speculate for price to increase, which is an absurdity of the current real estate market.

Dr. Pham The Anh, chief economist at the Institute for Economic and Policy Research (VEPR), said that investors should diversify their investment portfolios, pay attention to keeping cash safe with a large proportion to be used when there are economic opportunities, instead of impatiently pouring capital into investment channels as at present, when the general picture of the global and domestic economy has not completely recovered and there are still many potential risks ahead.

Luu Thuy

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