Property sales remain sluggish in Ho Chi Minh City, especially in newly-developed projects and apartments, realtors said, blaming it on banks' credit-tightening which may last until the middle of next year.
Prices of most new apartments remain rooted, while those of project land lots have fallen slightly after a short-lived hike last month, they said. Projects refer to government-approved land that is designated mainly for building row houses and sold by developers.
Pham Hoang Huu Bac, business manager of Nha Xanh real estate company, said apartments in the city's northwestern area have seen a drop of VND2-3 million per square meter. His company has recorded no transactions or customer inquiries into project land though many people are seeking to sell their land.
On the other hand, many deals involving houses in outlying residential areas are being done, Bac said. Most buyers lived in other provinces and bought the houses for VND500-700 million for their children who have begun studying in the city this school year, he added.
Most realtors and analysts agreed the market would remain comatose, with prices falling even further, until the second quarter of next year at the earliest.
The government's tight monetary policy and banks' caution while lending against property, which have cut off funds for both developers and potential buyers, would remain in place for some time, they pointed out.
The stock market, which thrived and fueled the real estate bubble last year, has performed badly this year, with the Vnlndex falling to a third of its all-time high last year.
The global financial crisis, which has hit Vietnam's major export markets, would also hurt the real estate market of the export-oriented economy until next year, the VnExpress newswire quoted Adam McCarty, chief economist of the consulting Mekong Economics Company, as saying.
The market could only expect to improve if there are positive changes in the macro economy, monetary policy and legal system, he was quoted as saying.
"The market can only revive when the capital valve is open," Nha Xanh Company's Bac said. "We expect fresh signs on the real estate market in March 2009," he said without elaboration.
However, some-analysts forecast an increase in the number of transactions by year-end when many investors may have to make distress sales of properties cheaply to repay bank loans.
After the real estate rush last year, property-backed loans are higher than currency reserves and pose a risk to the economy, the Vietnam Investment Review said recently, citing Le Xuan Nghia, head of the central bank's Banking Development Strategy Department.
Total loans collateralized by property are as much as VND500 trillion (US$30 billion), the report said. The risk is still less than in markets such as the US where 70 percent of bank loans are backed by property assets, Nghia said..
Vietnam's currency reserves increased to $21.9 billion by the end of September, central bank governor Nguyen Van Giau said recently.
But Do Thi Loan, secretary general of the Ho Chi Minh City Real Estate Association (HOREA), said the real estate market is just "getting back into order" after a period of overheating in the last two years.
"The property market is not frozen and hasn't gone into recession like many people suggest," Loan said in an interview with Bloomberg last week. "Foreign direct investment is still pouring into the property sector. Of the $47 billion FDI in Vietnam in the first eight months, 50 percent was committed to property projects."
In Ho Chi Minh City, 85 percent of the $7.9 billion FDI in the period is set to flow into real estate, she said.
"Many Singaporean and Malaysian real estate developers have visited our organization in the last few months to look for property projects," she added.
The real estate market's attractiveness lies in the country's young population and rapid urbanization. About 70 percent of the country's population of 86 million is aged below 35, official statistics show.
"These people will need to get married and a place to live," Loan said. "This will sustain a huge demand for housing."
The Ministry of Construction has predicted that 45 million people will live in urban areas by 2020, she said.
"Vietnam will need a lot more construction of residential and office buildings and factories in the next 10 years."
Source: Thanhnien News