» » Real estate developers bogged down in Da Nang

Two years ago, experts warned about the shortage of apartments and offices for lease in the central city of Da Nang, and now they are talking about the oversupply of apartments and offices.

Investors jumped in

The investor of Indochina Riverside Tower announced that 100% of its apartments have been sold, while 50% of office spaces for lease are occupied. This proves to be good news for a newly emerging real estate market like Da Nang.

However, not all investors have obtained such satisfactory results as Indochina, the investor of Indochina Riverside Tower.

Indochina kicked off construction in mid 2006, when construction material prices were at low levels. The investor has a lot of advantages in accessing clients as it was a pioneer project in terms of grade-A apartment and office leasing in the central city.

Other investors, who have been rushing to inject money in real estate projects since experts warned about the apartment and office shortage, may be not as lucky as Indochina. It is expected that a series of apartment and office buildings will be put into operation in some more years, which may cause oversupply in the nearly emerging market.

According to the Da Nang Investment Promotion Centre, few apartment and office projects were implemented in 2006, including Indochina Riverside ($27mil), Vinh Trung Plaza ($20mil), Hoang Anh Gia Lai ($150mil) and Savico (VND30bil). Meanwhile, a lot of projects have been kicked off recently, including Deawon Catavil ($300mil), VinaCapital Square ($325mil), Vien Dong Meridian ($180mil), Vu Chau Long ($125mil), True Friends Park ($90mil), Vegas Hotel & Villas ($100mil).

The Da Nang real estate market, a newly emerging and less attractive commercial hub than Hanoi and HCM City, proves to be a small cake, with not enough slices for every investor.

Hopes dashed

Marc Townsend, General Director of CB Richard Ellis, the real estate consultancy and asset management firm, said in a meeting introducing a luxury apartment project it managed in Da Nang that Da Nang would become a strategic destination in the near future after Vietnam officially joined the WTO. Da Nang is the central point of three big cultural heritages, Hue ancient capital, Hoi An ancient town and My Son Relics. He said Da Nang would also attract people because Da Nang beach has been ranked by Forbes as one of the most beautiful beaches on the planet. Moreover, big international golf course projects to become operational in 2008 will also attract international tourists.

The targeted clients the investors of apartment and office projects aim at are foreign investors and experts who go to Da Nang to do business, mostly from Japan, South Korea, Macau, Hong Kong and Malaysia.

However, the prediction has not come true.

Meanwhile, the policy on tightening real estate credit and the increasingly high banking interest rates both have made the number of apartment buyers decrease.

At the ground breaking-ceremony for South Korea-invested True Friends Park project held recently in Da Nang, the project’s real estate consultancy officer said that Da Nang now has a lot of offices and apartments for lease, therefore, her job of marketing the products will be very challenging.

Sources said that many investors are trying to slow down the construction process if projects are under construction, while others are delaying projects to listen to the news. In the context of the frozen market, these registered projects may possibly become ‘pending for indefinite time’ projects.

(Source: TBKTSG)

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