Pham Nhat Linh, Head of Consulting and Market Research for Knight Frank, said the real estate market in Hanoi in the 3rd quarter of 2011 continued to be quiet due to a lack of credit and continuing difficult economic conditions. The government has still been firm in implementing “Resolution 11” restricting loans to the sector, with the aim of reducing the risk of an overheating property sector.
Liquidity is particularly low
Liquidity in the residential sector was especially low in the 3rd quarter of 2011. Many potential buyers are hesitating or adopting a “wait and see” approach, first due to difficulties accessing finance, and second due to alternative investment mediums offering better returns over the quarter, notably gold. The apartment for sale market has seen one notable project, Hoa Binh Green City, which started selling in the 3rd quarter of 2011, while a number of projects were delayed due to a lack of capital. Sales rates have been sluggish although we have seen some projects continue to sell, for example Green Park and Skyview in Cau Giay District.
Going forward, the performance of the residential market will be linked to factors such as the inflation rate, the government’s monetary policy and the performance of alternative investment mediums such as gold and the domestic stock market. It must be noted however that the main drivers of “end user” demand for apartments; population growth, urbanisation, increasing incomes and a substandard, aging existing stock, continue to provide a bright medium term future for the residential market.
Retail sector is going down
According to the statistics of Knight Frank, the retail market supply in HCM City is approximately 658,000 m2, including supermarkets, commercial podium, department stores and shopping centres. The figure of Savills Vietnam is equivalent to about 620,000m2.
In Hanoi, within four years, approximately 1.6 million sq.m of retail is expected to go into the market. During this period several large projects will come into operation in Times Vincom City, Royal City and Vincom Village, at Usilk City project, and Ciputra mall Mega.
Knight Frank shows that the number of visitors to shopping centres has decreased by 10 percent - 30 percent. So some retailers will re-negotiate the terms of their rent. The retail market is expected to remain difficult in the coming time.
Retail market investors in commercial centres must expect the recovery of funds over a longer duration. The reduction of rent will be done in the beginning when the decline of shoppers at the retail centre.
However, many international retailers plan to continue to participate in the Vietnamese market because the Vietnam consumer market is rated higher potential than other countries in the region.
Ms Pham Nhat Linh said the retail market has proved to be fairly robust during the last quarter of 2011, with rents generally remaining flat and a number of new openings increasing modern retail provision in the city. “We are seeing numerous international brands considering further outlying areas from city centre, with the west of the city increasingly seen as a future retail destination. The latest shopping mall which came online in Q2/2011, PicoMall, has been successfully leasing up, yet the proposed cinema for the mall has not opened as announced earlier. In the next quarter the market will see a lot more activity, with the expected opening of Parkson in Keangnam Hanoi Landmark Tower.”
Rents apartment decreased
In the serviced apartment market, there were no new projects that entered the market during the quarter. Total stock therefore remained at 2,500 units in 55 projects. Occupancy rates for Grade A, B and C stood at 85 percent, 90 percent and 90 percent respectively. Knight Frank notes that a lot of enquiries come from the diplomatic community of Hanoi who saw the beginning of new missions at the end of the quarter. Increasingly the sector is coming under competition from high end apartment and villas for lease, notably from villas in the Tay Ho area. The next quarter will notably welcome 378 units in Keangnam Hanoi Landmark Tower.
The office market welcomed one project onto the market in Q3/2011, Viet A Building in Cau Giay District which added 17,000 m2 to total supply. In general, there was downward pressure on rents across the city, although this varied significantly according to the area and building. In the CBD, rents remained relatively stable and have not come down except for new buildings (which saw drops of up to 10 percent over the quarter) or existing buildings with major vacant space (with drops of 7-9 percent). To the west of the city, rents have decreased more with some buildings experienced 12 to 15 percent drops. Major competition comes from Charm Vit Tower and Keangnam Hanoi Landmark Tower.
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