Opinions vary about the existence of a “real estate bubble” due to contradictory indicators in the Hanoi and HCM City markets. Financial experts agree, however, that keeping a close watch over the real estate market is necessary.

National Finance Supervision Council Deputy Chairman Le Xuan Nghia stated that there is no real estate bubble in Vietnam.

Nghia’s view differs with Vikram Nehru’s, Chief Economist for East Asia of the World Bank.

Upon release of an updated report about the East Asia and Pacific economy several days ago, Nehru noted that disturbing signs have reappeared and that the real estate and stock bubble has returned.

According to Nghia, the high real estate supply level and weak demand in HCM City have forced prices down by a half from their highest peak.

Outstanding loans funding real estate investments now account for 51 percent of the total outstanding loans in HCM City and 14 percent of those in Hanoi.

“The housing supply and real estate credit have a close link. We cannot talk about a boom if the real estate prices in HCM City keep decreasing,” Nghia remarked.

His assessment may only fit the HCM City situation, since Hanoi’s real estate prices have been increasing.

Prices in Hanoi have been escalating rapidly and experts have every reason to believe that a real estate bubble has appeared.

Local newspaper Dau Tu quoted Ngo Tri Long, a senior economist, as saying that real estate prices are increasing quickly because they have exceeded the actual value due to speculation.

Long also observed that overvaluation is occurring in the stock market as well.

“Businesses have just escaped from their most difficult period. It is illogical for stock prices to have increased so sharply,” Long argued.

Nghia disagrees, stating that there is no stock bubble. He noted that, under the current regulations, banks must not use more than 20 percent of their capital to fund securities investment and affirmed that regulations have been strictly followed by banks.

Nghia added that while many billions of dong have been injected into the stock market, the market’s growth is just at a “relatively high” level and is still lower than the growth rate of China’s market.

He acknowledged, however, that it is necessary to approach the hot development of the real estate and stock markets with caution.