In 2011, the real estate market is unlikely to experience fevers as in 2010; information about the property market will be publicised in a more complete and faster way; and people will have more options to buy, according to experts.
Riding the wave of capital planning
One of major reasons for the wide fluctuation of the real estate market in recent years, particularly in 2010, is the planning of the capital city until 2030 and towards 2050. 244 projects had to wait for final approval to fit the master development plan.
These pending projects decrease supply in the midst of rising demand. This is one of main reasons for the continuous increase of real estate price in Hanoi while Ho Chi Minh City is quite different.
In the coming time, the Prime Minister will sign to ratify capital expansion planning for the period to 2030 and towards 2050. This event will open up a new race among big real estate companies. This is a milestone for the 2011 property market because it will influence investment and development trends for the next 40 years.
Mr Nguyen Huu Cuong, Chairman of the Hanoi Real Estate Club cum General Director of Cuong Phat Group, said: “Real estate will be more active in 2011 with the Prime Minister’s ratification of the capital planning project and investment opportunities of companies will be clearer.”
Cuong added that the property market will be in a better form next year thanks to Government Decree 71 and Circular 16, which provide detailed provisions on project transfer by primary investors. Accordingly, primary investors must choose secondary investors with strong financial capacity to carry out projects without interruption.
Difficult to cause “waves”
In 2011, according to experts, the real estate supply will increase and investors will have more options, forcing investors to adjust prices and improve service quality to attract customers. Dr Dinh The Hien, an economist, said: When supply is rising, investors will not have many opportunities to create "waves." The domestic developing economy will attract much of the investment capital to real estate. Hopefully, the market will warm up in 2011.
Mr Nguyen Van Minh, General Secretary of the Vietnam Real Estate Association, also said that the property market is expected to be more active in 2011 and prices will continue going up, but there will be fewer sudden local fevers as in 2010.
“Cash flows will have a more practical impact on the real estate market in 2010. There will be a few “buy high, sell low” cases. Meanwhile, per capita GDP will continue to increase strongly (doubling every 10 years) and housing demand will thus grow,” Mr Minh added.
Signals of investment attraction became more optimistic from late 2010. Currently, 833 new projects are being invested by the Netherlands, the United States, South Korea and other nations. According to the Ministry of Planning and Investment, real estate investment accounted for 21.5 percent of total FDI capital. In the first 11 months of 2010, total real estate retail sales increased 25 percent over the same period in 2009.
Mr Dane Moodie, Marketing Director and Project Development from Colliers Company, said: The amended law on housing and the land law will create favourable conditions for overseas Vietnamese to own houses in Vietnam. Overseas Vietnamese will have good opportunities to invest in real estate in Vietnam.
Hot with housing; cold with offices for rent
While the undersupply of housing persists, oversupply continues in the office market after a long time of strong investment.
Remarking on future market trends, Dr Nguyen Quang Tuyen, Head of the Land Law Faculty, Hanoi Law University, said: The real estate market in 2011 will develop dramatically, especially for low-cost housing. In fact, the supply of houses still does not match the demand.
He pointed out that, most urban and apartment projects were targeted at middle and high income earners in recent years; thus, the demand of this segment has been basically met, while housing projects for low income earners remained limited even though low-income people without real estate were the majority. At present, for investors, the profit is higher from residential products for medium and high income earners.
To develop housing for low income earners, according to Dr Nguyen Quang Tuyen, the State should introduce credit preference regimes as well as land rental reductions to attract large investors. In 2010, Vinaconex Xuan Mai Joint Stock Company launched housing products for low income earners in Ngo Thi Nham apartment project in Ha Dong district. Impressively, applications reached 2,000 while the supply was only 325 units. This showed that the demand of this housing segment is very high.
Unlike the housing segment, offices for rent are now facing an excess in supply. According to the latest surveys on office markets in Hanoi and Ho Chi Minh City by CBRE Vietnam, a real estate consultant, this segment is facing price reduction pressure from early 2011.
In 2010, the market welcomed a series of office buildings, including the 5-star 620-room Grand Plaza Hotel and the 386-room Crown Plaza. In 2011, the supply will increase as Keangnam Hanoi Landmark Tower, EVN Towers, Crown Plaza Complex and Tower Handico will join the market. The large supply from western districts of Hanoi will affect prices in the future.
According to research by Knight Frank Vietnam Company, with an additional 150,000 to 200,000 square metres of offices, rental prices may decrease in the west of Hanoi and downtown.
A representative from CBRE Vietnam said there will be additional high-end office projects with total area of around 214,000 square metres in early 2011 and offices for rent will be a new trend of development in 2011. At present, many investors have proactively reduced rents for long-term contracts. This is considered a typical market trend.
Luong Tuan
Vietnamese
