Investors look at a model of a property development. A study has valued Viet Nam's property market at US$21 billion. — VNA/VNS Photo Hoang Lam

HA NOI (Biz Hub) — A study by Nomura Research Institute (NRI) of Japan estimated the value of Viet Nam's property market at US$21 billion, a far cry from that of some of its neighbours.

The study provided estimates for the value of the property markets of Japan ($2.67 trillion), Singapore ($241 billion), Indonesia ($189 billion) and Malaysia ($84 billion), along with those of Thailand ($89 billion) and the Philippines ($48 billion).

Can Van Luc, Deputy General Director of the Bank for Investment and Development of Viet Nam (BIDV), explained that the country's real estate market was established and developed on a small scale in the past 10 years, in comparison with those of other countries in the region.

However, exactly 70 per cent of capital invested in the sector came from bank loans, and 65 per cent of collateral was also in the form of property.

As of December 31, 2013, real estate loans amounted to around VND262 trillion ($12.5 billion), accounting for 8 per cent of total outstanding loans. In addition, property lending in Viet Nam was also 2.5 times higher than the international standard.

Luc said foreign direct investment (FDI) in the sector has recovered following several years of sharp decline.

According to the Ministry of Planning and Investment's Foreign Investment Agency, total registered FDI capital in the sector in the first seven months of the year reached $1.13 billion, representing a 65 per cent year-on-year increase.

The market is finding it difficult to mobilise capital from people as real estate prices in Viet Nam remain high, say the experts.

Dang Hung Vo, former Deputy Minister of Natural Resources and Environment, said one of paradoxes of the market was that the average price of houses was 25 times higher than the average annual income of labourers, while that of other countries was merely two to four times higher.

Vo said that if workers saved 25 per cent of their income, it would take 100 years to buy a house. For social housing projects, the time would be 10 years.

He added that an oversupply of high-end apartments has created a high inventory and bad debts, alongside a lack of low-cost housing projects.

However, Sigrid Zialcita, Managing Director, Research Services for Cushman & Wakefield in the Asia Pacific, said the number of middle-income families in the country has doubled in the past five years, and this development could lead to an increase in the sale of houses.

She added that Viet Nam's economy was developing rapidly and was poised to attract multinational companies, thus contributing to the growth of the country's office market. — VNS