Real Estate Market: Unbalanced

Mr Richard Leech, Executive Manager of CBRE, said the easing interest rate policy adopted by the State Bank signalled an economic recovery. But, he added that impacts of lower interest rates will be difficultly seen on the real estate market. To speed up sales, real estate projects cannot rely on policy but preferences and discounts in addition to marketing and information transparency.

 

Mr Tran Nhu Trung, Director of Market Consulting and Research, Savills, said: The market is unlikely to revive strongly because the market greatly depends on investors. If there are no big promotions or discounts at present, the liquidity will hardly increase.

 

According to Savills, the ongoing frozen market is not resulted from monetary or fiscal policy but property prices unaffordable to most buyers. As a result, the market slid into the state of illiquidity.

 

Many high-end condos projects cannot sell their products although they offer original prices plus 7 percent discount. This is unprecedented in history.

 

Separate price hikes are believed to be act of speculation by CBRE. Indeed, many successful deals have been recorded. Mr Nguyen Minh Tuan, Deputy Director of CBRE, said economic slowdown caused cash flows in the real estate market to fall.

 

According to Savills Vietnam, the Vietnamese market received 21 new projects with 9,600 units offered for sale in the third quarter of 2011. Only 2 percent of Grade A apartments were sold in the third quarter, while the rates of Grade B and Grade C segments were 3 percent and 22 percent, respectively. Apartments with selling prices ranging from VND2 billion to VND3 billion are catching the interest of the market.

 

The freezing of high-end apartment segment reflects unbalanced supply and demand on the market. While luxury apartments are unsellable, homebuyers are only care about cheaper, affordable ones. This reality does not happen in one or two projects; thus, the market needs strong actions from project investors.

 

Although many domestic investors are still standing on the sideline, the market is expected to warm up in the fourth quarter when many people want to own a home when they have big sum of incomes at the end of the year, according to Mr Nguyen Minh Tuan.

 

Savills Vietnam added that the market trend from now till the end of the year is vague. It is twilight. Apart from macroeconomic factors, the market also depends on investor psychology. “It is good news that many investors are willing to change their business plans, like a change in categories, quality, and area while it is hardly possible to persuade them to do it in 2008 and 2009. Therefore, I believe the market will be brighter and attract more investors," said Mr Tran Nhu Trung.

 

Notably, both CBRE and Savills shared the anticipation that Gia Lam, Long Bien and Me Linh areas (in Hanoi) have a very bright outlook because prices in other places in Hanoi like in the west are too high. According to CBRE’s third quarter research, prices in these places even increased 3 percent over the previous quarter. “This contrast to the general market trend reflects a growing interest in the eastern region [of Hanoi]”, said CBRE. Besides, according to Savills, interest rate reduction is a challenge for primary investors but it is an opportunity for retail investors in the future.