Hanoi Property Market Plummets

Tightened credit policy seems to start impacting the Hanoi real estate market. Many projects cannot find buyers. This distressful reality is quickly outspreading and most projects on offer are adversely affected.

 

This actuality is totally different from one year ago as many projects with impressively perfected infrastructure systems like Usilk City invested by Song Da Thang Long Joint Stock Company on extended Le Van Luong Road cannot find buyers. This is one of biggest housing projects in the capital city where 13 modern apartment blocks with from 25 floors to 50 floors are designed to supply 2,500 apartments, enough space for about 10,000 residents. The selling price is quoted by the investor at US$1,080 - 1,200 (or VND27 million) per square meter. This complex has been put up for sale for two years but sales have gone very slow. At present, many secondary investors are offering at base prices but there are very few buyers.

 

With upcoming oversupply, many projects have started to offer discounts to attract customers. Rung Co project - a component of Ecopark township complex - announced a reduction of 12 percent.

 

Unlike Ecopark project, Southern Richland project invested by Lam Vien Joint Stock Company, Mulberry Lane project invested by Capitaland Ha Thanh Co., Ltd allow longer periods of settlement in addition to 5 - 10 percent markdown in selling prices. Even, Landmark Tower project is stimulating sales by supporting customers to borrow up to 85 percent of apartment value. However, outcomes are not as good as expected in the current context.

 

The price-losing storm is sweeping discounts on an increasing scale through not only in affordable housing segment but also high-end one. Projects on sale like Tan Tay Do and AZ Thang Long on National Road 32 or Kien Hung Apartment on Road 70 have discounted selling prices by VND2 - 4 million per square metre but buyers still stay aside.

 

In addition to negative macroeconomic impacts, the slump is also attributed to growing supply this year, according to CBRE Vietnam - a leading real estate consulting company in Vietnam. In the first quarter of 2011 alone, additional 44,000 apartments are offered for sale by secondary investors, an increase of 12 percent from the fourth quarter of 2010. This figure is exclusive of apartments directly sold by primary investors.

 

Prices on hot projects like Geleximco, Van Phu, Van Khe, Duong Noi and Van Canh are deflating. Notably, prices are dropping day after day since mid-May. According to data compiled by Vietnam Business Forum, residential ground in Kim Chung - Di Trach area is leading the speed of price cut as prices have marked down VND6 - 9 million to VND40 - 48 million per square metre, depending on locations.

 

Real estate specialists warned that prices might continue to drop sharply as residential lands in urban projects are kept by secondary investors.

 

Geleximco Thang Long project, which used to be a hot pick by investors, is witnessing a strong decline in selling prices. Section A sees the sharpest drop of VND8 million to some VND40 million per square metre. Prices on sections B and C, with wider inner roads, sank to below VND50 million per square metre. This reality is also the case in other projects like Van Khe and Van Phu where investors slashed prices by VND3 - 5 million per square metre but no transactions have been reached.

 

While cash flows are shrinking owing to credit crunch policy, many real estate investors start to settle mature loans. According to experts, if cash flows cannot increase, a getaway on the real estate market is likely to happen.

 

Mr Nguyen Ba An, Deputy Director of Development Strategy Institute which comes under the Ministry of Planning and Investment, said, the market is in favour of homebuyers. He emphasised that “This is the best time for people with savings because property values are gradually returning to the real value.

 

Psychologically, when property prices are on the fall, end-buyers will hope for continued declines in prices. As a result, money supply will hardly increase. Hence, this is a good time for people to pay right prices for apartments.