Property Market: Dominated by Investors with Strong Finance

Although the macro economy still faces many difficulties, the real estate market has been of great interest to foreign investors. According to statistics of the Ministry of Planning and Investment, as of 20^th August, 2014, Vietnam had attracted 992 newly licensed projects with a total registered capital of US$7.246 billion (up 29 percent over the same period in 2013), along with 349 projects licensed from previous years having US$2,985 billion of additional capital. In total, this year, the total registered capital in real estate projects of foreign investors has been up to US$10.232 billion.

 

Real estate business is currently ranked second in attracting foreign investors (11.3 percent) and followed by the processing and manufacturing sector (68.4 percent). Economic experts said that, real estate field, tourism and hotel business are currently considered to be very attractive, along with the attractiveness and tough competitiveness in the field of retail and food and beverage. So, from now until the end of the year, foreign-invested capital may flow into real estate sector; however, will focus on the southern region, especially in Ho Chi Minh City due to the positive signals of Ho Chi Minh City during over time.

 

In August, 2014, Ho Chi Minh City approved a series of planned projects such as partially adjusting the detailed planning rate 1/500 of housing in Phu Huu, Ward 9, adjusting the detailed planning rate 1/500 in Tham Luong depot, Tan Thoi Nhat ward, district 12, detailed plan rate 1/20000 of Hiep Phuoc industrial park, Nha Be.

 

Ho Chi Minh City infrastructure has significantly improved as some streets got out of traffic jam situation, and other works are rushing to complete such as the traffic engineering Phase 1, construction package No. 9, Project of highway North – South, from Ho Chi Minh City - Long Thanh - Dau Giay at the intersection at Perimeter 2.

 

When the route putting into operation will withstand loads of over 10 tonnes truck or container from 20-40 feet, which will help reduce load of a large number of trucks on the highway and promote trade among Ho Chi Minh City with surrounding provinces.

 

With the diverse transportation network, meeting the demand for transport and travel, Ho Chi Minh City is creating a huge boost for investors. Today, not only cheap apartment project but bottom land project in the surrounding area of Ho Chi Minh City can enjoy benefits. Many investors launched its products into the market to compete with the apartment segment which is fairly active trading over last time.

 

Hanoi’s real estate market is making a new turning point as the short term supply will decrease by the decision to halt new construction projects in urban areas that the Government issued in June.

 

Therefore, the real estate investors will have to increase investment in their existing projects or acquire those which are having capital difficulties. The supply has gradually tightened again; this will somehow have impacts on the selling price of apartments. This is still a segment with the highest demand. Premium segment has also shown a good sign when liquidity is gradually improving.

 

Obviously, there are still many opportunities to trade on the real estate market, but the chances are for those with strong financial potential. It is because the real estate business by the loan is very risky, in addition to difficulties in accessing the loans, so, borrowers will have to borrow in a short time with high interest rate. 

 

Currently, it is very difficult to access the medium and long term loans from banks even with the high interest rate applicable of 13 to 13.5 percent / year. But for businesses with the limited financial capital, if they refuse to borrow from banks, projects will come to a halt. This is also the reason why a series of projects are no longer able to complete.

 

Currently, there are about 60 real estate firms listed on the stock market accounting for approximately 10 percent of the total capitalization value in the market. However, Vietnam's stock market is not a channel to provide the long-term capital to the real estate businesses. More than 70 percent of real estate investment capital comes from the banks. Therefore, the real estate businesses mainly operate based on loans from banks or by mobilizing capital from their major customers.

 

Faced with risks of real estate business activities, the State Bank has decided to restrict credit investing in real estate for the last almost 5 years, real estate loans / total outstanding loans of the economy has declined significantly. Currently, the total real estate loans in the country are more than VND260 trillion, accounting for 8 percent of the total outstanding loans of the whole banking system.

 

From now until the end of 2014 and the following years, to seize opportunities, real estate enterprises have to handle the bottleneck of capital, especially for long-term funding to become more active business operation.