According to CBRE, as of the end of Quarter 2/2012, the HCMC Real Estate market was still grey and frozen; especially the segment of offices for lease suffered much pressure, with quantity and price going down and supply going up in the coming time. In this context, investors are doing their best to save the market.
Offices for lease suffering much pressure
According to CBRE, by the end of Quarter 2/2012, the price of offices for lease in HCMC continued to suffer a decrease- the consecutive 11th quarter decrease of A grade office. Over supply made A-grade office price go down. Real estate developers are now facing fiercer competition to offer lease rate. Total area actually rented of A and B-grade office in quarter 2/2012 was 15,361m2, down by 48.5 percent against the last quarter. Despite acceptable rate the lodgers have paid for nearly 3 years, low economic growth rate in the first half of 2012 has brought down demand.
Regarding the decline of offices for lease, Mr Marc Townsend – CBRE Vietnam’s CEO estimated that the decline in rate of A-grade office has slowed down in the past three quarters at 1.9 percent in quarter 2/2012, nearly 4 percentage points lower than the decline rate in quarter 4/2011.
Besides the pressure from declining volume, it is difficult for office for lease to see any increase in rate when low economic growth rate in the first half of 2012 is bringing down demand. “Declining demand, increasing supply and large existing vacant area in A and B rank buildings will put down all expectation to see any rate recovery”, stated Mr Adam Bury, Senior Manager of Research and Consulting Department of CBRE.
Another pressure on sector of office for lease comes from the current grey context in which the number of vacant offices increases without possibility of rate increase while supply will go up in coming time. Particularly, from now to the end of 2012, there will be a variety of A- grade office buildings offered. Times Square Building, with 2 fronts on the most expensive streets of Sai Gon – Nguyen Hue and Dong Khoi – are being completed and expected to release to the market nearly 13,000m2 actual rent area in Quarter IV/2012. Meanwhile, President Place Building, located at the junction between Nguyen Du – Nam Ky Khoi Nghia, next to Independence Palace, is expected to join the market in Quarter III with more than 9,000m2 office for lease.
In addition to office sector, the sector of A-rank apartment was also in the similarly grey context with decreasing price. In Quarter II/2012, investors grimaced to see escalating vacancy rate of A-rank apartment for lease. The rate now is 17.3 percent. Thus, it has increased by 4.4 percentage points against quarter I/2012. It can be seen that in such current context, the investors accept to reduce the price to attract lodgers.
In general, the unsteady light in apartment sector of HCMC real estate market in quarter II is the successful transaction of 350 apartments in medium segment. The offered price is US$700-3,900/m2 depending on the segment. Besides, the market of houses attached to land in quarter 2 continued to see demand mainly in the projects of villas with good location and quality such as project Vetura (District 2), project Chateau (District 7) etc with the selling rate up to 80 percent.
It is said by the experts that thank to decreased inflation and interest rate, the market has witnessed more positive changes. However, positive psychology hasn’t had obvious impacts on selling status with slight increase by 5 percent in selling pace against last quarter. Market attention has been raised but mostly from those buying houses for living. Also according to CBRE, despite this segment getting warmer than last quarter and higher number of completed and offered houses, similar to apartments, transaction volume in living houses sector is still limited.
Effort to save the market
Facing liquidation that hasn’t been improved, in the past time, investors have given many offers to boost up sales with promotion and preferential payment methods. The most popular form is to lengthen payment time with many methods, including allowing handover of houses upon payment of 50 percent house value. Some investors also have customers to pay 30 percent in advance while the rest amount will be paid in 6-24 months at favorable interest rate. There are varied conditions for apartment handover, from raw construction to complete construction such as project Tropic Garden in District 2, project BCCI in Binh Tan district etc.
Sharing about this issue, Mr Adam Bury said that in the past time, investors are trying their best to recover the market by giving many offers. Among those, the methods of assistance through interest rate or increase in discount are considered the cure for the real estate in coming time. “Although the economy has gone over the hard time, it takes more time to recover. What happened in the past is not the proof for the future. However, if real estate sees what occurred in 2009, we can expect that apartment consumption pace will increase again in at least 2 quarters”, predicted Mr Adam Bury.
Nevertheless, not all investors can contend till the market recovery due to exhaustion in capital and energy, which makes them sell to release inventory, clear output to turn over the capital. It is supposed by Mr Le Hoang Chau, Chairman of HCMC Real Estate Association, that the biggest concern of real estate investors now is how to sell their products but not how to make loan. The reason is 2012 will still be a hard time for all stakeholders in real estate market. Pressure of liquidation, handling inventory and recovering customers’ trust is burdening real estate enterprises.
Ha Linh
Vietnamese
