Fierce Competition among Real Estate Segments

According to Mr Richard Leech, by the end of 2013, the Vietnam Asset Management Company (VAMC) had bought over VND39 trillion of bad debt from 35 banks. It is planned that in 2014, VAMC will continue to buy from VND70-100 trillion of bad debts by special bonds and sell bad loans for investors interested in under-market rates. Currently, the government has disbursed VND1,322 billion in the package worth VND30,000 billion to 3,023 customers, up 64 percent compared with December 2013. The recently launched support package worth VND50,000 billion is expected to help the real estate market get over the difficult period.

 

According to CBRE's report, in the first quarter of 2014, the apartment for sale market continues to witness new cautious selling offer activities with 1,540 apartments from 4 projects, down 17 percent compared to the same period last year. Meanwhile, the number of completed apartments increased, reaching 2,716 units and up percent compared to the first quarter of 2013. Selling and offering activities become vibrant with 6 out of 10 projects offered in this quarter with a total of 689 apartments. This suggests that investors are still focusing on solving inventory rather than launching new products.

 

Prominent evolution in the first quarter is that the average secondary asking price has increased after 11 consecutive quarters of decline, for the first time reaching an average increase of 1.1 percent for the overall market over the previous quarter. Price increases mainly occur in the projects offering adequate utilities and complete infrastructure. Meanwhile, a few projects still continue to witness reduced prices though at a slower pace than in the previous quarter. This is because investors cannot lower price too much when having to consider investment costs and construction costs. In addition, the fact that there are several completed projects has attracted buyers; especially when construction progress is also being considered an important factor, besides price.

 

In the first quarter of 2014, transactions took place early in first period of the year and mainly in middle-level projects. However, in high-end segment with apartments of over VND30 million, transactions are still good. This year saw an unusual trend of transactions beginning immediately after Tet holiday, in spite of the traditional view of not conducting important transactions at that period.

 

In the first quarter of 2014, Ministry of Construction proposed the elimination of the mandatory implementation of transactions through the real estate trading floor. If the proposal is approved, investors will have to choose to sell apartments through the main trading floor of themselves. This will make the competition among brokers more intense, yet help improve the transparency of the market.

 

It is expected that there will be more complete projects in 2014, which will create more intense competition for new apartments offered for sale. Buyers spend more attention apartments which are nearly completed in order to avoid problems related to poor quality and slow handover. Investors should also focus more on the development of utilities and infrastructure to create a convenient living environment for residents.

 

"In Hanoi, great importance will be attached to the East and North West area of the city, as there is ongoing oversupply in the West as well as the nearly impossibility of construction projects in the central area. Price is expected to increase; however it is still too early to confirm that this trend will continue throughout 2014 “said Mr Richard Leech.

 

The villa and adjacent house market in urban areas in the last quarter has seen positive signs. There has been no offering of new projects but mainly re-selling projects including Ao Sao, Dai Thanh and Xuan Phuong. These projects offer adjacent houses (Dai Thanh offers ground) for the price of VND2 to 3.5 billion/ unit. Notably, a number of recent projects have offered attractive rates which are even lower than the price of condominium projects or residential neighbourhoods.

 

Some typical projects such as Ao Sao offered the price from VND20 million a square metre, Dai Thanh from VND26 million a square metre, Tan Tay from VND13 million a square metre. The above examples show a new trend that some villa and adjacent house projects are competing directly with middle-level and ordinary condominium projects in the housing segment of the price of VND2-3 billion.

 

Selling prices in the secondary market witness two distinct trends. For some projects which are already completed or near completion in Ha Dong and Tu Liem, selling prices rose slightly by 5-7 percent. Meanwhile, for the projects in low progress in Me Linh and Quoc Oai, selling prices continue to fall.

 

To facilitate buyers, many investors are applying attractive payment terms ever. Typically, customers buying villas and adjacent houses in Phase 1 of Gamuda Gardens urban area (a division of Gamuda City project) just have to pay 20 percent of the contract value to get the house, the remaining 80 percent of the contract value will be paid within four years with the interest of 0 percent.

 

In the context of abundant supply and competition from the middle-level and ordinary condominium projects, adopting flexible payment terms as above is one of the more effective ways that investors can apply to accelerate sales rate.