Vietnam Real Estate - The fall in property prices has continued over the past three weeks as lackluster demand has shown no signs of improvement. In some places in HCMC, prices have declined over 60% while the market in and around Hanoi has seen a drop of 15-25% from the fourth quarter last year.
A report by HCMC-based real estate firm Vinaland says that over the past four months, condo prices in some projects in the city have plummeted by half. Take the Him Lam-Nam Khanh project in District 8 for example. Condos in this project are now offered at VND12 million per square meter, down from VND25-26 million in February.
In recent months, the real estate market has grown sluggish as a result of the monetary tightening policy and anxiety about the strong volatility of the dong/dollar exchange rate.
The market, especially in Hanoi, HCMC and neighboring areas, ran wild last year and in the first quarter of this year, with prices shooting up to sky-high levels. Bulls rushed to buy land and apartments in the hopes of making quick bucks, thus leading to bubble prices.
However, since March the markets in Hanoi, HCMC and some major cities, have taken a nosedive. The number of offers has kept rising but there have been few successful transactions.
Figures from the Ministry of Construction show that land and housing prices have slid by around 20-40%, or even 40-60%. This corresponds to the central Government's measures to curb inflation.
In the meantime, real estate developers have complained that they are on the verge of bankruptcy but have never mentioned the big profit they earned during the booming time of the market.
The HCMC Real Estate Association (HoREA) has written to the city government and ministries seeking permission for member real estate developers to mobilize capital from buyers before the completion of a project's foundation. Association members say they have difficulty developing their projects due to lack of access to bank loans. However, the booming period saw many projects being launched and their apartments are still selling well.
Prices are actually on the decrease but remain higher than what were originally offered by investors. Prices of apartments of different qualities in HCMC are still double the original levels.
HCMC Institute for Economic Research director Tran Du Lich has described the fall in land and condo prices as a positive development, saying the prices skyrocketed in the past.
Deputy Minister of Construction Nguyen Tran Nam told reporters in HCMC in end-May that the profit currently earned by real estate firms remained big despite the market slump. "Don't be worried about them," he says.
In reality, a lot of investors are injecting money in new property projects and this will put pressure on existing developers to offer reasonable prices if they want their projects to sell well.
Commenting on Vietnam's property market, Christophe Fossick, managing director of the real estate services firm Jones Lang Lasalle Vietnam for Southeast Asia, says the market is in the febrifuge rather than frozen state.
According to the Jones Lang Lasalle, the apartment market segment has seen a price fall of 15-20% from the fourth quarter of last year. However, the company forecast that it will recover in line with the national economy by the end of 2009 or early 2010 and the enforcement of new real estate policies, such as allowing foreign people to own apartments in Vietnam.
While local companies are complaining about the market, foreign investors are searching for a slice of the pie. Many big-ticket property projects have been licensed in recent months, including a US$1.6-billion project of Starbay Holdings on Phu Quoc Island off the coast of Kien Giang Province, a US$4.2-billion Ho Tram Strip project of Canada's ACDL in the southern coast province of Ba Ria-Vung Tau, and a US$ 1.29-billion complex of the U.S.-based Good Choice Group, national groups have decided to put their money into real estate projects in HCMC, Hanoi and other major economic centers in the country, such as Ha Tay, Danang, Binh Duong and Dong Nai.
A real estate expert of HoREA says the real estate market remains promising and that cash-strapped local developers should consider transferring their projects to foreign companies as a practical move to get out of the doldrums.
Many foreign investors are interested in the domestic real estate market and willing to inject funds into long-term projects. Since they are not familiar with administrative procedures here in Vietnam, they often choose to take over half-done projects.
In the long term, Deputy Minister Nam says, increasing the supply is one of the best solutions to cope with the volatility of the market. Thereby, the ministry has asked provincial authorities to review property development projects and make a list of priority projects.
To do this, investment, land allocation and land clearance should be sped up while punitive sanctions should be taken against any delays in the project implementation process.
However, according to both local and foreign investors, the most important thing is that the transparency of policies for the real estate market must be ensured to help develop the market in a sustainable manner and establish real value for property.
Vietnam Real Estate
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