Hanoi real estate market remains hot while others cold

The Hanoi real estate market remained very hot in the first quarter of 2008 despite economic uncertainties and tightened monetary policy, according to CB Richard Ellis Group (CBRE).

Leasing fees high at trade centres

CBRE said that as supply remains short, the average leasing fee at trade centres in the first quarter of 2008 soared to $65/sq m. With the low unoccupied ratio of less than 1%, leasing fees will keep rising.

The average leasing fee for A-class offices is now $50/sq m/month, up by 28% over the end of 2007. The rate may reach $60/sq m/month for offices in advantageous positions. B-class offices are also being hunted, and going for $35-40/sq m/month.

Most of the buildings to be put into operation in the coming days are fully occupied. The newly opened Asia Tower, which is located near the Big Cathedral, has a long list of clients.

It is expected that two more buildings will become operational this year. Viet Tower with the total leasing area of 10,500 sq m is nearly completed, and will be put into operation soon, while Sun City with 5,000 sq m and 5,00 sq m for lease will be opened on June 15. Both of the buildings are fully occupied with Ericsson and JP Morgan being the two biggest clients.

House prices down in HCM City, staying firm in Hanoi

It is clear that the tightened monetary policy has been affecting real estate trade. In HCM City, individual investors are selling apartments because they cannot maintain bank loans. The high lending interest rates make it less attractive for domestic buyers when buying houses with borrowed money.

However, unlike HCM City, which has been witnessing real estate prices drop by 20-30%, real estate prices in Hanoi are staying firmly high. In the capital the projects on developing high-grade accommodations in central areas are still growing well.

The leasing fees for high-grade apartments are hovering between $30-50/sq m/month, the same levels as seen in big cities of other countries. The 5-star hotel room rate is $155/night, up by 30% over 2007.

According to CBRE, the tentative plan on expanding Hanoi has driven land prices in the neighbouring province of Ha Tay up. However, the prices are expected to go down again when speculation wanes. It is clear that speculating land plots in areas with no clear development plan is very risky, and if the infrastructure in the area cannot meet the expected demand, the land price would drop rapidly.

The tightened real estate credit has brought about big difficulties for investors, making it hard to mobilise capital for incomplete construction works. However, the indefinite delay of domestic invested projects could be an opportunity for foreign investors, who can mobilise capital cheaply.

In such a circumstance, domestic investors, who have the land use rights, cannot arrange enough capital for project development, and foreign investors, who have good financial capability, can more easily negotiate projects.