Vietnam Realty Market Expected to Revive Strongly in 2011

The report, entitled Vietnam's Real Estate Market in 2009 and Prospects for 2010, surveyed more than 35 property firms and 500 consumers and experts in Ha Noi and Ho Chi Minh City. Accordingly, up to 61.5 % of surveyed consumers said they would purchase property for residential purposes with 11.5 % buying for short-term gains and 27 % for longer-term returns. According to the survey, 57.1 % of real estate firms anticipated that real estate prices in big cities would remain unchanged while nearly 43 % believed that prices would sharply rise and none expected a decline in prices. As many as 43 % of correspondents in Ha Noi believed that the real estate supply would increase strongly while 57 % thought there would be a moderate growth rate. The rates are 28.6 % and 71.4 %, respectively, in Ho Chi Minh City.

According to the survey, the property boom happened in every five or six years in Vietnam (in 1995, in 2002 and in 2007). Thus, the price rise cycle is envisaged in 2011 or 2012, not in 2009 or 2010.

 

Most experts said the Vietnamese real estate market will bounce back in 2010 and 2011. Regarding high-grade apartment segments, surveyed firms forecast that there would be no significant change in the short term while there would be a slight rise in prices of common apartment segments due to urbanisation.

 

As for houses for low-income people, 60 % of correspondents forecast that this market segment would boom on account of numerous incentives from the State and growing demand.

 

In 2008, when the Vietnamese property market started a decline cycle, many economic experts anticipated that domestic real estate companies would sell out their assets to foreign firms and, as a result, the Vietnamese real estate market would be manipulated by foreigners. “The fact is now the contrary,” said Mr. Marc Towsend, Managing Director of CBRE Vietnam, a leading real estate consultant in the country.

 

Mr. Marc Towsend pointed out that the market slump forced many property firms to sell their projects partially or entirely to settle debts. However, transferees were mainly domestic firms, not foreigners. Even, many foreign realty companies had to sell their projects to Vietnamese partners to keep their capital.

 

The report is evidenced by a number of well-known project transfers. For instance, Nam Long Bitexco Investment and Production Joint Stock Company acquired a 10-storey building on a land plot of 4,350 square metres on Vo Van Tan Street, District 3, Ho Chi Minh City at US$8 million. Previously, Hoa Binh Real Estate Trading and Construction Joint Stock Company transferred the rights to use 2,700 square metres of land approved for office building in Phu My Hung Urban Zone (District 7, HCM City) to Dong Duong Company at US$11.9 million. Raffles Group sold nearly 16 hectares to Vincom Joint Stock Company at US$70 per square metre.

 

According to several experts, foreign companies did not have as much money as we had thought. “When they [foreign investors] arrived in Vietnam, they thought they could purchase cheap assets because domestic firms would not be able to survive on lack of capital. They were disappointed at their failures to purchase. Even, their sizeable projects had been acquired by domestic investors,” said Mr. Marc Towsend.

 

Besides, another reason was the shallower integration of Vietnam into the international economy. Thus, when the global crisis happened, Vietnamese enterprises suffered less negative impacts than foreigners, especially in capital. According to experts, Vietnamese enterprises are “anchoring” at safety harbours and the financial storm caused little impacts on their businesses. Meanwhile, foreign entities are compared to big ships at a stormy sea.

 

At present, while many factors turned unattractive, such as prices falling 50 - 60 % from the peak in 2007, many foreign investors had to weigh their portfolios. “The Vietnamese real estate market typically lacks transparent information, a disadvantage side for foreign investors. Meanwhile, Vietnamese enterprises with thorough market knowledge and custom have the advantage,” Mr. Marc Towsend pointed out.