High interest rate is one of the reasons that have hindered real estate market at the end of the year. Although many sales promotion programmes have been launched, the market seems to stay still. To make the matter worse, segment of offices for lease is becoming increasingly dull.
Increased promotion
Real estate market in Hanoi still goes against the common trend of all the country. Although there are not many successful real estate transactions due to high interest rate, land price still keeps increasing because of speculators pushing up price. Real estate price, according to experts, is high in spite of low liquidity and few successful transactions.
The explanation for land price’s increase when there is no buyer is the sudden rise in prices of gold and USD dollar in last months of the year. Another reason that makes real estate market less liquid as a lot of investors shift their investment into gold and USD dollar instead of into real estate. Price raise in real estate in Hanoi has caused much difficulty in selling through brokerage companies. People with real need of housing cannot afford when the price is too high, which holds up the market.
In order to improve market, many investors have implemented promotional methods to increase purchasing power of customers such as decrease apartment’s price by two to ten percent, assist with 50 percent of bank loans’ interest rate, sell houses by installments in 15 years or make customers pay partial price of apartments etc. This kind of promotional method has somehow influenced customers with real need of houses. However, when there are many options in buying houses, customers’ requirements of quality, living conditions become more demanding.
House buyers begin to eye evaluating quality of living environment, investors’ reputation before making the final decision, which is the decisive factor that makes real estate investors careful in joining the market; they only enter the market when there are works of quality, with reasonable prices and high appreciation from people. Therefore, despite promotional methods’ impact on customers, according to experts, it is just necessary condition, some buildings lack sufficient condition of high quality to draw people’s concern. This is reason why year-end real estate market still operates perfunctorily.
Redundancy in office for lease
Among all, segment of office for lease deals with the most challenges. Supply is increasing whereas demand is decreasing; especially A-level offices for lease are redundant.
According to statistics of Savills Vietnam, in third quarter of 2010, supply of offices for lease increases by four percent against last quarter, especially there are 154 high buildings of all levels with total area for lease of one million meter square in Ho Chi Minh City. With redundant supply, investors continuously reduce leasing price to attract customers, particularly in third quarter of 2010, there is a three percent reduction in the market of offices for lease compared with last quarter due to sharp decrease in leasing offices’ price, which appeals a great number of customers in individual apartments, helping leasing ratio on average stay stably at nearly 90 percent against last quarter.
Despite old buildings not being filled, new office buildings are still launched, making the market enter period of “indigestion” of office for lease. According to statistics of Real Estate CBRE company, by the end of 2010 in the market there will be more 14 high buildings brought into use, providing net area of about 100,000 meter square. Based on supply and demand in the market, CBRE Vietnam indicated that price of A-level offices will continue to slightly decrease to US$36.7 per meter square per month against last quarter. In the investors’ opinion, target customers in the following time are still banks, financial organizations, service companies, real estate companies and training centers.
At the moment, as real estate experts’ estimation, unoccupied area of the market is 13.4 percent and this rate will increase in 2011. Therefore, in 2011, investors are going to be kept facing internal competition for customers buying offices and renting out at lower price.
As many predictions, with promotional race for customers, 2011 will witness fierce competition among investors in segment of offices, especially A-level ones and the most beneficiary is customers.
Luong Tuan
Vietnamese
