Vietnam economic prospect for the short term is still not very bright due to economic and financial instabilities. Recently, Vietnam has its long term credit ranked lower by Standard& Poor’s, from BB to BB- while its short term credit’s remains at BB level.
As evaluated by Colliers, Vietnam economic short term risks include: budget and trade deficit, lack of capital, high interest rate, inflation, foreign debts, currency devaluation. Worries about these risks have been reflected in the Government’s recent adjustment of GDP forecast for this year from 6.5 to 6 percent. This has made up negative impacts on Real Estate market.
Office segment continuing to be under pressure of price decrease
Office segment in the third quarter of 2011 has seen much improvement. A level office market had the using ratio of 95.3 percent (increasing by 0.9 percent point against last quarter) while B level office market had lower ratio, 90 percent. Despite positive movements, office segment hasn’t met building owners’ expectation. They are still proceeding with promotional campaigns, flexible rent tenure and even accepting rents of small area or whole floor in long term.
According to Colliers’ calculation, in the fourth quarter of 2011, there will be about 200,000 square metre offices (both A and B level) going to the market. Thus, in next three years, the market will be added 1.5 million square metres of new offices, which will triple total supply. Facing such large supply, the trend of leasing and selling office floor is becoming popular. It is a way to fill buildings, quickly call back capital and save time.
Price of land in central Hanoi equal to that of Tokyo and Paris
Hanoi land prices vary upon locations, infrastructure development and in many cases upon speculative factor. Colliers’ research shows that the nearer to center the land is, the larger variant price margin is. Commercial advantage depends on locations of central districts, which causes obvious difference between lane houses and facing-road ones. The most expensive price is of facing-road apartments in streets around Hoan Kiem Lake, which sometime equal to that in Tokyo or Paris.
Apartment for sales slowdown
According to study by Collier, apartment for sales in the third quarter has seen a slowdown with few transactions. Significant decrease in land price against the last quarter didn’t attract buyers. Grounds in some Western areas, especially projects along Highway 32 which are boosting completion have their price reduced by 15 – 20 percent against the last quarter. Condo market has also been quiet with so few transactions and less supply. The reason given is impacts of “unlucky month”, plus psychological factor of investors and State Bank’s policy to tighten credit. Hanoi overall planning also made no positive influence on the market as expected by investors.
It is thought by Colliers that condo supply in coming years will still concentrate on the Western area of the city. Besides, the number of condos in next three years will focus on segments of medium and luxurious ones even though recently low-price segment has been more attractive. The reason it usually takes investors several years to implement construction projects and they hardly response quickly to market changes.
As for demand, at the moment, most buyers in Vietnam are investors (accounting for 60-70 percent). However, those with large real demands are young couples and people from other provinces who are working or want to have their children study and work in the city. In such current economic context, real demand is gradually directing the market to real value. Apartments of less than US$150,000 and small and medium area is drawing much concern from clients. Despite sign of price decrease in the market in third quarter, people’s expectation hasn’t been met as decrease was only 2 percent on average.
Colliers’ study shows that, despite decreased selling price, real estate market is hardly busy in next quarter since there are so few products for clients while the majority of apartment offered is medium and luxurious ones.
Retail floor segment remaining leading position
By the end of third quarter 2011, the total retail space in Hanoi increased by 3.83 percent against last quarter with appearance of Hang Da Galleria and Oriental Tower, an area of about 325,000 square metres, in which shopping malls account for 44.3 percent of total floor area. Occupation ratio of this segment is still high, especially in central area, there is always lack of space supply, retail shopping centres here often have highest occupation ratio and witness good number of buyers. Occupation ratio in the central area has been equal or higher than 95 percent while shopping malls outside the center record occupation ratio of 86.85 percent on average.
Despite not positive national economic status, retail sector will remain its development thanks to increasing living standard and demand for products of high quality.
Retail floor supply in areas outside the centre continues to exceed new supply in central area due to limited land budget.
Given continual increase in shopping demand and big residential projects, plazas of large scale will be popular retail form in future. These plazas can provide most forms of product and services like spa, beauty salons, recreational centers, restaurants, cinemas etc to create a destination meeting all needs of customers. Hanoi will gradually become a mature retail market, which can be compared to other developed cities in South East Asia region.
Luong Tuan
Vietnamese
