No Major Change in Real Estate Market in Final Half

“Supply and demand in the real estate market are moving closer together with the demand remaining high and the supply having not yet met the demand,” said Nguyen Tien Thoa, head of the Department of Price Management under the Ministry of Finance, talking about the landscape of the real estate market in the first half of this year.

 

With results of surveys and research of the real estate market and reports by departments of finance of provinces and cities, the Department of Price Management said that despite quietness in most localities, since May there had been optimistic signs for some goods of the market in major cities.

 

The State has issued policies in order to remove difficulties and obstacles for enterprises and investors in the real estate market. While the real estate market in the final half of this year remains quiet, the market of residential areas with well-developed infrastructure and urban areas, and offices for lease has heated up in comparison with the first half. The Phu My Hung urban area in Ho Chi Minh City is an example. The market of offices for lease in Hanoi and Ho Chi Minh City is still busy with an occupancy rate of 100 per cent, despite high rents, almost doubling office rents in Bangkok, Thailand.

 

Nonetheless, in general, Thoa said that the market’s activities had not been better yet. Concretely, prices for land use right transfer in most provinces and cities in the first half of 2006 remained stable in comparison with 2005. Prices fell in many localities and increased in some concrete places, mainly major cities including Hanoi and Ho Chi Minh City. Market prices are thought to be suitable with prices stipulated by the People’s Committees of provinces and cities. However, prices of land use right transfer in some localities are higher. Prices in Thai Nguyen, for example, are between 30 and 40 per cent, or even 66 per cent in particular, higher; and Lai Chau, between 15 and 20 per cent. In many provinces, such as Gia Lai, Phu Yen, Hoa Binh and Bac Ninh, prices dropped by between five and 20 per cent. Prices of houses and land in places planned for the building of houses, palaces, garden houses and residential areas, did not increase. Instead, they have tended to go down, especially prices of flats in concentrated residential areas.

 

According to reports of 17 out of 51 localities with concentrated residential areas, urban areas and industrial parks, prices of flats have tended to fall. In comparison with two previous years, prices have fell by between VND 500,000 and 1 million per square metre, or between VND 50 million and 100 million per flat. However, the Department of Price Management said that prices had reduced because speculators had cut difference between base prices and their asking prices, instead of the fact that developers had cut their prices. In this context, some project developers have taken measures to stimulate the demand by cutting prices and promoting advertisement to get their capital back for accelerating capital turnover and cutting bank loan interests.

 

The market of houses for rent and offices for lease is busier despite high rents, much higher than other countries in the region. Occupancy rate in some places has reached 99 per cent. The supply cannot meet the demand, especially in major cities. Rents of offices in deluxe buildings in downtown of cities are divided into many levels. Rents of offices, class A, in comfortable buildings in downtown of cities with well-developed facilities stand at between US$20 and 30 per square metre per month. The figure is put at between US$15 and 20 for offices, class B, with less services or less convenient locations and views. Rents of offices, class C, in buildings and residential areas with comfortable facilities but with less services and less convenient locations, is put at US$8 and 15 per square metre per month.

 

In the final half of 2006, there have been optimistic signals of transactions of land use right in provinces and cities. However, in many provinces, auctions for land use right have not been organised yet or they have been organised but with low success rate. Bidding prices in auctions match with market prices, and are stable in comparison with 2005. Many localities remain difficult in auctioning land use right because they have not had concrete mechanisms on using funds for infrastructure development and lack of investment capital or face obstacles in implementing regulations on land use right auction.

 

To boost the real estate market in localities, the Department of Price Management has proposed some solutions, including the establishment of a Land Fund Development Centre to manage and exploit land fund better, creating housing fund suitable with incomes of most people, and generating a supply matching the payment demand. The department forecasts that in the final half of 2006 there will be no major change in the market as the real demand of people in many localities are not high. The demand for houses is mainly seen high in major cities. However, with low incomes, many people cannot buy houses priced high. In many localities, the building of houses for low income earners has been proposed but it is still on papers.