Why real estate bubble has not popped in Vietnam?

The real estate bubble does exist in Vietnam, but it is hard to burst right now and may be just slowly deflate due to the following reasons:

Firstly, the Vietnam’ real estate market is strongly affected by the speculators who are backed up by owners of real estate projects and the bankers. These people are integrated because they share the common benefits. For their own sake, they will do everything to prevent the real estate market from blowing up. The lack of transparency of information related to real estate projects and the fact that the laws related to real estate are hard to implement have create opportunities for speculators to take advantage. To achieve their ultimate objective, they are even willing to take part in illegal actions (like making tacit consents with real estate project developers to manipulate the real estate prices as they want) (VnEconomy, 2011).

Secondly, most of local investors do not have independent judgments; their decisions are not determined based on economic fundamentals and usually ruled by the herd syndrome. Thus, even the market is frozen, but the investors still keep investing in some segments which investors have strong belief that they will generate profit (e.g. low income housing segment) (VnExpress, 2012).

Thirdly, due to the severe consequences which real estate bubble may cause for the banking system and the entire national economy, the Vietnamese government has implemented a number of policies to deflate the real estate bubble. The most highlighted policy is to tighten the access credit for loans, especially real estate loans. Nevertheless, this seems to be a temporary solution and in long term it may become the cause of negative credit activities (more and more people and business entities seek for loans from black credit market) (Vietbao, 2012).

Fourthly, many investors buy in at the high prices and they do not want to make huge loss, therefore, the local investors still hold to the real estate assets and refuse to reduce the prices. Even if they have liquidity problem or their debts are due, they borrow more money rather than sell out the real estate assets with the hope that the market will recover in the near future as the demand for this kind of asset is big and keeps increasing (Vietnam Financial Network, 2012).

Although the real estate bubble in Vietnam does not immediately burst, but as the matter of fact sooner or later a bubble has to burst, the real estate prices have to be back to the real values. According to the predictions of economic expert, the real estate bubble will pop in the late 2012, and it will take a lot of time for the market to recover.