'Fever' in the residential land market, should you buy now or not?

To answer the concerns of buyers of landed property, General Director of Viet An Hoa Company, Tran Khanh Quang, said that land purchase behavior depends on many different needs. Therefore, it is necessary to divide into target groups to give specific recommendations.

Mr. Quang pointed out that there are 3 main groups of customers buying land in the market today: speculators, investors and buyers for use (saving, building houses, giving to children). This expert pointed out the characteristics and habits of each customer group with a warning.

For speculators:Currently, the real estate market in many provinces and cities is in the hands of speculators and is led by this group. For the group of customers who collect land for speculation, the hot market is a great opportunity for them to create waves and surf. Most speculators have large and long-term capital, enough buying and selling power to cause price fluctuations in the market... They often go in groups to buy and have a fairly methodical buying and selling strategy in a proactive position.

The hotter the market, the more active speculators are. They only stop buying when the market turns around, falls into difficulty, and begins the crisis cycle.

Illustration photo. Source: internet

For investors: Land fever is both an opportunity and a challenge for investors. In terms of opportunities, land prices increase, this group of customers can take advantage of the good trading market, high purchasing power, easy to buy and sell for profit. However, investors do not have enough power to create waves but only follow the waves, so they are not as proactive as speculators.

The challenge for investors is that despite their high knowledge and understanding of the market, they cannot avoid the psychology of buying with the crowd. The rising price bubble makes greed grow, pushing investors into a situation where they prioritize profits, disregard real value and legality, leading to high risks.

Advice for investors is that if you buy land when the market is hot with idle cash, you should only spend 30% of your cash to invest in real estate at the present time. The remaining 70% of your cash is considered an opportunity-hunting cash flow that should be kept to be released at a more appropriate time. If you use financial leverage at this time, investors should consider not borrowing beyond the safety threshold (only borrowing 50% of the property value or less).

For purchase use only: This is the least experienced customer group in the market and is most likely to suffer losses if buying land during hot market times. This customer group only buys land when there is a need (to use, keep as savings, give to children) and often has financial resources ready or can find financial support (from banks, family).

If the buyer of land for use is not in a hurry, he can delay the transaction to observe, explore, evaluate, find legal advice, and then make a decision. The reality is that the current land price level is very high, with virtual prices and real prices mixed together.

As for those who buy land for their own use and have to borrow money from banks and are financially constrained, they can temporarily delay for 12 months to survey the market and then make a decision based on actual developments. The disadvantage of waiting for prices to drop to buy land is that it is likely that they will have to wait a long time, at least 12 months or more, to know the market trend.

A contradictory reality today is that, although the land fever has occurred and lasted continuously for 4 years (2015 - 2016 - 2017-2018), it is still impossible to determine when the market will enter a recession cycle. In addition, it is not excluded that, even when land prices have decreased, the market price of the property is still too high compared to the affordability of this group of customers.

Expert Tran Khanh Quang commented that at any time, whether in crisis or fever, the real estate market has intertwined buying and selling needs. For those who buy land for use, delaying when encountering a land fever scenario is considered a safe solution to avoid buying at a loss. Meanwhile, for speculators and investors, land fever is a golden time to buy and sell immediately because waiting will make them lose the opportunity.

Answering the question of whether there will ever be a decline after the land fever, Mr. Quang said that if there is an increase cycle, there will be a decrease cycle. However, the increase-decrease graph of land prices also depends on the location and area where the real estate is located.

If the land is legally complete, located in a place that can be built, exploited, used for living or rented, the possibility of price reduction is very low. On the contrary, land located in a location with low population density, incomplete legal status, low opportunities for exploitation, leasing, and commercial activities, the land price may adjust when the market enters a recession or crisis cycle.