The Sensitivity of the Real Estate Market to Planning Information

The real estate market is known to be sensitive to planning information. When news about infrastructure development and urban planning emerges, it often triggers a rush of people to buy and invest in real estate properties. This phenomenon has been observed in various cities, including Hanoi, Vietnam, where property prices have soared due to extensive infrastructure improvements.

Riding the Wave of Infrastructure-led Price Increase

According to a specialized report titled “Infrastructure Real Estate: Opportunities and Challenges” published by the Real Estate Research Institute and the Vietnam Real Estate Association, experts have highlighted the strong correlation between Hanoi’s real estate prices and infrastructure development over the years. The report states that transportation infrastructure has played a crucial role in shaping the city’s urban landscape and the real estate market. The past 15 years have seen significant fluctuations in property prices, coinciding with the expansion of the city’s borders in 2008.

Infrastructure improvements involved the construction of new roads, improved traffic junctions such as Thang Long Avenue, Ring Road 2, and Ring Road 3 connecting Thanh Tri to Mai Dich, as well as the recent connection from Mai Dich to Thang Long Bridge, Road 32, and links to National Highway 5 and Nhat Tan Bridge. Additionally, there have been expansions and enhancements of intra-city transportation routes and radial roads, facilitating convenient commerce and travel. This has led to the formation of several new urban areas, including Giao Luu City, Vinhomes Royal City, Vinhomes Smart City, Vinhomes Ocean Park, An Hung Urban Area, Tay Ho Tay Urban Area, Gamuda City, and Park City. These new urban areas are now connected to the transportation infrastructure, creating sophisticated communities within the city.

Investors often seize the opportunity to ride the wave of rising property prices when there is investment and infrastructure development. Land prices along new infrastructure routes benefit from convenient transportation and the development of trade and commerce. Consequently, this leads to the establishment of more industrial zones, residential areas, commercial centers, and resorts.

Real estate projects located in areas with well-developed infrastructure experience high price increases. Over the past five years, the average annual price growth for these projects has been between 8% and 35% depending on the specific project. For example, the selling price of apartments in Ciputra has increased by 30-35% since 2017. Currently, apartment prices range from 31-62 million VND per square meter, depending on the location and size of the unit. Other projects such as Vinhomes Smart City, The Manor, Sudico, Van Phu Urban Area, and An Hung Urban Area have also witnessed an average price increase of 30-50% since their launch.

Caution in Investing Based Solely on Planning

Nguyen Van Dinh, Chairman of the Vietnam Real Estate Brokers Association, has emphasized that investing in line with planning and infrastructure is a popular trend among investors. This is particularly true in major cities like Hanoi, where real estate prices have dramatically increased thanks to infrastructure development.

Dinh stated, “The real estate market in Vietnam, especially Hanoi, has proven to be sensitive to planning information due to the lack of public and transparent data. Most crucial planning information is spread through word-of-mouth and undisclosed sources. As a result, people often rush to buy properties even before the information is confirmed, leading to continuous price surges.”

Investors can easily fall victim to a chain reaction, diving into the market without careful consideration and calculation. When prices exceed their actual value, investors risk losing their investments. Consequently, houses and land are often priced beyond the financial means of those in need, while certain areas remain abandoned due to speculative ownership and unaffordable prices, leading to a lack of investment and cash flow.

Although investing ahead of planned infrastructure development can bring significant profit gains, Dinh also emphasized the potential high risks associated with such investments.

Dinh highlighted four important factors for investors to consider when investing in planned infrastructure:

1. Investors need to thoroughly research and verify information about planning and infrastructure projects available in the market. They should only invest when the information is accurate and has a clear roadmap.

2. Investors should carefully examine the timeline and implementation plan for infrastructure and planning projects that have been approved. They should assess the expected profit and choose the right time to invest and sell accordingly.

3. Not all areas surrounding infrastructure projects will experience a simultaneous increase in real estate prices. Therefore, investors need to thoroughly study the market characteristics and economic potential of each specific area before making a final investment decision.

4. Real estate values only truly increase when urban areas and communities are formed. Therefore, investors should make financially sound plans, especially when utilizing financial leverage.

In conclusion, the sensitivity of the real estate market to planning information is undeniable. Investors must exercise caution and conduct thorough research before making investment decisions based solely on infrastructure development and planning. While these investments can lead to substantial profits, they also carry significant risks. Understanding the market and carefully analyzing the available information is crucial when venturing into the world of real estate investment.