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Herd mentality adds to volatility of fluctuating real estate market
Vietnamese citizen Nguyen Hoai Nam bought a plot of land in Ba Vi District's Tan Linh Commune after hearing that the national administrative centre in Ba Dinh District would be moved to Ba Vi.
"I followed my friends and bought the property in the hopes that its price would increase much higher than what I had bought at VND800 million," Nam recalls.
Nam is not alone in his thinking.
It is not uncommon to see a number of investors pouring their money into buying land, following the advice of their relatives and friends.
Vice chairman of the Viet Nam Report Company Phung Hoang Co put forth a survey that found that nearly 62 per cent of the 500 questioned consumers in Ha Noi had bought real estate simply to resell it at a higher price.
"In many cases, herd mentality is a decisive factor to the fluctuating real estate market," said vice general secretary of the Association of Cities of Viet Nam Vu Thi Vinh.
She attributed the trend to insufficient information and a lack of understanding leading to many buyers who are then unable to analyse real changes in the market. Instead, they rely on the advice of acquaintances to buy land.
The Viet Nam Report survey also found that 44 per cent of buyers had invested their own money in buying property; 35 per cent borrowed from their friends and relatives and about 20 per cent used bank loans to buy property.
The desire to buy land has been boisterous in Ha Noi in the past months with projects spanning across the new urban areas of the capital's western region.
Analysts have attributed the trend to the expansion of the Lang-Hoa Lac Highway (now Thang Long Boulevard) and to an exhibition that focused on the capital's vision for development over the coming decades. The exhibition revealed that five satellite cities and the proposed Thang Long axis would link the Ba Vi region to the west of Ha Noi.
Former Vice Minister of Natural Resources and Environment Dang Hung Vo said the recent land fever in Ba Vi in particular and in the western region in general exposed the reality that both managers and investors were not professional.
"How can a project like Ba Vi, which is still waiting for planning approval, create an outbreak of land fever where several hundreds of investors rushed to buy land there?" said Vo.
He said land fever in Ba Vi did not follow market rules. Traders did not study information carefully but simply rushed into decisions because of the herd mentality.
Le Minh Hoang of the Ha Noi Real Estate Joint-Stock Company said most of the land fever actually deflated quickly because investors were short of information. And unfortunately, one negative consequence was wildly fluctuating real estate prices, he said.
Hoang added that the real estate market will be impossible to stablise if investors remain vague about information.
The problem, however, will hopefully be settled after the recent issuance of Government Decree 71, which imposes stricter rules on real estate investment.
Vo said the decree will help solve various issues, including the ways in which project developers raise capital from buyers and the regulations for the transfer of land-use rights, among others.
The decree is also expected to raise the market's transparency.
Vo said he hoped the decree would reject unprofessionalism and speculative investors who often spread misleading information to seek a profit.
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