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VNRE - Savills, CB Richard Ellis (CBRE) and Knight Frank all forecast a dark prospect for Vietnam’s southern real estate market. All three companies anticipated that the supply will increase in volume in all segments but investors only focus on profit-making and quick capital-recovering investments from 2012 to 2014.

Luxury real estate slack

Rudolf Hever, Associate Director of Research and Consultancy Division at CB Richard Ellis (Vietnam) Co., Ltd, said: It is still too early to predict the bottom of real estate rents but the speed of decline is slowing “because there is no Class A project launched in 2011. Thus, the office for lease market will focus on Class B and C segments where Class B segment supplied nearly 42,000 square metres in the first quarter of 2011.”

However, Mr. Rudolf Hever noted that the vacant space in Class B and C segments may rise. Besides, in the next three quarters, the supply of these two segments will climb. Thus, to boost sales, investors need to calculate reasonable prices and add utilities for tenants.

According to Savills, office rents continued to decline 3 percent quarter on quarter to reach approximately US$29 per square metre. The significant increase in supply brought down the occupancy rate 3 percentage points to 80 percent. Most office building owners are reducing rents to keep current tenants and attract new ones to fill up the vacant space when the supply is on the rise.

Brett Ashton, Managing Director of Savills Vietnam Limited, said: There will be no Class A office coming online in Ho Chi Minh City from now to early 2012 because investors tighten investments for high-grade projects as sales go slowly. Office rents decreased 3 percent on average in all segments. However, as the supply increased significantly, the occupancy rate dropped 3 percent to 80 percent.

According to Savills, after 2012, the market will see about 960,000 square metres of office space to be launched onto the market. This will forces rents to go down further. The supply in 2011 is estimated at 140,000 square metres, down 28 percent from the same period last year. Future office buildings are mainly located in District 1 and District 7. Tan Binh District and District 4 are expected to attract many tenants in the future because they are near to the downtown with good traffic systems and importantly have reasonable rent rates.

Investors focus on profitable segments

Although sales are sluggish, the supply will increase in all segments, according to Savills. From 2012 to 2014, some 23 projects with over 14,500 apartments will be offered for sale in the next two quarters. Together with 15,000 apartments unsold from current projects, the condos supply will be extremely abundant, making the market more competitive than ever. According to Savills, investors must take appropriate strategies to adapt to the rapid changing market. About 42 projects with about 24,000 new apartments will be completed and go online from 2012 to 2014.

As regards hotel segment, the market is estimated to see 750 five-star rooms, 628 four-star rooms and 170 three-star rooms to be launched onto the market in 2011 and 2012. In the next four years, 22 serviced apartment projects with more than 5,200 units will go online. This segment remains attractive to investors. District 3 and Tan Binh District are expected to be good locations for serviced apartments.

Besides, at least three retail centres will go into operation in the second quarter of 2011, supplying approximately 42,000 square metres of retail space. From the second quarter onwards, the retail market will have another 960,000 square metres of new supplies, which mainly come from District 1, District 2 and District 7 (with about 70 percent of supply). Villas and semidetached houses for sale will mainly concentrate in outskirts districts like Thu Duc, Cu Chi, Hoc Mon, District 9, Binh Tan and Go Vap because land funds there are more available.

According to real estate consulting firm, Knight Frank, in the coming time, buyers will switch to buy and invest in villas, townhouses and residential land because they bring in quick profit while outlooks for high-rise apartments are not very bright.

CBRE predicted that, before 2015, as many as 1.4 million square metres of offices for lease will be launched onto the market. However, in reality, only 43.7 percent of them are under construction and more than 56 percent remaining are unsure because of funding difficulties.

Besides, to be paid back quickly, when projects are nearly completed, investors will have to find all ways to sell their products. According to experts, this is an opportunity for speculators to buy.

Reporte by Ha Linh | VCCI News

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