Friday, February 17, 2012

Investors remain optimistic about property market

Many foreign investors consider the current downturn in the local property market an opportunity for them to jump in and stay ahead when the market recovers.

Many developers, particularly those who rely heavily on big loans from banks, are lamenting their current situation in which they cannot clear their stocks as buyers are holding a wait-and-see attitude toward the market.


Under pressure of paying debts, many of them fear that if the gloomy market is not improved, they’ll sooner or later go bankrupt.

However, for foreign investors, this is a good opportunity, despite high interest rates, credit restriction and inflation.

Current difficulties in Vietnam are short term because inflation is one of the things the Government has decided to tackle.

Observing Vietnam from outside, Dyer said the Government was doing necessary measures to reduce inflation, according to Colin Dyer, president and CEO of Jones Lang LaSalle.

Overall, Vietnam and the rest of Asia are on a growth path because rising population and urbanization can keep fueling commercial property markets.

David Lyons, Vietnam Country Head of Jones Lang LaSalle Vietnam, echoed Dyer’s view. He said Jones Lang LaSalle’s global network was recording a positive sentiment from investors, especially foreign ones who are coming into the market to sound out opportunities.

“We are seeing the property cycle in Vietnam now at or near the bottom…foreign investors say it is time to start to come in,” Lyons said.

Both experts reiterated the current difficult situation in the market, saying high interest rates make it hard to access banks’ credit. Across the board, not only development and investment companies but individuals are also seeing funds being dried out.

Given the difficulties, many cash-strapped developers have had to sell their projects and merger and acquisition activities are expected to continue to increase.

For instance, Daibiru Corporation, a commercial property owner and manager, entered into an agreement in late 2011 to acquire a company that owns the 18,000-square-meter grade A office building Saigon Tower on Le Duan Boulevard in downtown HCMC.

The deal is expected to be completed in January 2012.

Jones Lang LaSalle is reaching out its global network to search for potential investors for several projects that it acts as a broker such as the office building Centre Point on
Nguyen Van Troi Street, a multipurpose project named Royal Tower in the urban town Phu My Hung in HCMC’s District 7, and the Lam Son Square in the resort city of Vung Tau.

Lyons said his company was dealing with several international groups for those projects transactions. Most foreign investors come from within the Asian region, including Japan, Korea and Singapore because those investors understand the dynamic market.

Besides, the company is also getting inquiries from American investors. Those potential investors are interested in office buildings as well as industrial and logistic sectors.

Lyons said when more and more international investors were interested in Vietnam, it was the sign that the market has become more mature.

He thus expected the local property market to pick up again from the third quarter of this year.

Dyer seconded his colleague’s view, saying the market downturn was painful for short-term real estate companies and for the whole market, but it forced companies to restructure business and capital.

Office rent continues to drop.

Like other cities in the world, as office rent in HCMC’s central business districts has dropped by half, companies should move in to take advantage of the situation, Dyer said.

Office rent in HCMC is decreasing for 12 consecutive quarters with asking rent staying around US$32 – $43 per square meter for Grade A buildings, $14 – $32 for Grade B and $10 – $25 for Grade C.

According to the research team of Jones Lang LaSalle, current difficult market conditions are forcing some landlords, besides offering rental discounts or other incentives for long-term leasing contracts, to sell all or part of their buildings to recover their capital quickly.

Total net absorption in 2011 reached over 168,000 square meters, a decrease of 9.4 percent year-on-year.

In the last quarter of 2011, net absorption slumped across all grades, especially in Grade C and in suburban areas. This was probably due to office buildings in higher grades that offer attractive facilities, convenient locations, and increasingly competitive rents.

At the end of 2011, the market saw no new supply, thus the total stock of all grades in HCMC remained stable at over 1.3 million square meters. With more than 40 projects currently under construction with over 558,000 square meters, the total stock in HCMC is expected to double by the end of 2015.

Jones Lang LaSalle projected that this new level of supply would increase the vacancy rate in the HCMC office market, and thus rent could remain low in 2012.

Monday, February 13, 2012

Oversupply of condominium to hit Hanoi's real estate market

Ample supply of 21,000 apartments is likely to bring about price reduction in the quarter 2 of 2012.

It is estimated that 21,000 new apartments will be brought onto the market in 2012, which is appealing to buyers but stressful for sellers, according to Colliers Vietnam.

Two years ago, Euroland high-end apartment building in the European-Vietnamese Overseas Village in Mo Lao New Urban Area (Mo Lao Ward, Ha Dong District) was built with twin 30-storey towers and hundreds of adjacent villas. However, it is now hardly recognised among five towers of 30-40 storeys under Mulberry Lane project and tSTC under Sword Lake Plaza project.

Not so faraway is Van Khe New Urban Area with Usilk City Complex with 13 towers of 25-50 storeys and Van Phu New Urban Area with Deawoo Cleve project of 15 buildings of 36-40 storeys that is expected to provide more than 4,000 apartments in 2014.

Quarter 1 2012 will be the time for delivering houses of plenty of projects that were kicked off since 2007-2008 when property market bloomed. In the meantime, the pressure from the government's orientation of economic restructuring has dramatically driven prices of many apartments in Hanoi down by an average of 10pct-15pct and even 30pct since quarter 3 2011.

According to Colliers Vietnam's report on the property market in quarter 4 2011, the number of offered apartments for rent as well as successful transactions hit record low.

Around 4,500 apartments are estimated to brought onto the market this quarter, 40% of which are high-end apartments and 47pct are mid-range ones. TSTC of affordable prices and small areas have attracted a great deal of buyers' attention.

Apartments' prices are likely to reflect the real value and affordable housing will be available in 2012, according to Colliers Vietnam.

Credit squeeze together with restrictions on non-manufacturing loans with a view to tame inflation is expected to bring about capital shortage, which may result in many property projects being delayed, mortgaged or sold. At a result, housing prices could drop further in the first six months of 2012.

Saturday, February 11, 2012

Hanoi property developers race to boost sales through discount programs

The discount or sale-off programs of property projects, in such a gloomy market, are seen as brilliant idea to stimulate demand, the Lao Dong newspaper reported.

As from the beginning of 2012, a lot of real estate projects in Hanoi have offered promotion programs and cooperation with banks to support buyers.

Apart from the payment divided into many phases, Daewoo Cleve in coordination with banks to help house buyers borrow loans in Payment Phase 2 and Phase 4 with an amount of 25% of house value. Noticeably, the loans carried a soft interest rate of 12% per annum with monthly interest payment method and the principal will be paid as delivering houses in Q1 of 2014.

For Sky Garden project in Dinh Cong St (Hanoi), the investor also launched a preferential policy in the first capital contribution phase. Customers who pay 80% of property value will enjoy a discount of 10% of selling price. Especially, buyers will be funded up to 70% of capital through 3 years by banks.

Several common condominium projects also are racing to give gifts to attract buyers, such as a 2% discount or a 20 million dong voucher for buyers in Tan Tay Do Condo building, or a 50-million dong furniture package in Green Park project.

Generally, property project investors are aiming at real demanders whose budget is different from speculators’. So investors should have certain sharing with customers to boost sales and stimulate demand.

Mr Dang Van Quang, Director of Navigat real estate consulting firm, said that we should not be too pessimistic as the condominium market en mass offered discount, sale-off, or gift offering because in his opinion, reducing prices is an intelligent method to stimulate demand in such a gloomy situation like now.

Massive discount or promotion offering will push investors into risks. However, the market goes down, investors are forced to reduce expected profits. Even, after promotions, selling price may be back to principal investment cost, according to Mr Pham Thanh Mai-General Secretary of Vietnam Real Estate Association.

“In case of rising interest rates, increasing costs for construction materials or labour wage as well as other costs, projects may face big losses”, he emphasized.

The more importance, as said by Minister of Construction Trinh Dinh Dung, property firms need to restructure products which should be in medium and small size so as to be suitable with majority of real buyers.

Friday, February 10, 2012

Real estate developers struggle to collect money from buyers

While many real estate developers feel worried stiff because their apartments have been left unsold, others feel worried stiff because they cannot collect money from buyers.

Though the real estate projects' owners have signed the contracts on selling apartments to customers, they still do not have money, because buyers cannot make payment on schedule.

Edward Chi, Chair of the Minh Viet Investment Company, said that the biggest worry now for real estate firms is the tardiness in collecting money from buyers.

At the Tricon Towers project in Bac Anh Khanh residential quarter in Hoai Duc district of Hanoi, the majority of apartments have been sold, but the investor has not collected money in the second and third payment phases as previously planned.

The investor tries to share difficulties with the buyers by offering some preferences, including the price discounts and the delayed payment timetables.

However, as the credit has been tightened, commercial banks refuse to provide loans, the liquidity has become seriously weak, and the investor cannot take back the investment capital as previously expected.

Tricon Towers is not alone. Failing to collect money is the worry of many other investors.

The Mulberry Lane project in Ha Dong district developed by CapitaLand Hoang Thanh, a joint venture between a Vietnamese and a Singaporean enterprises, has seen the first phase of construction finished, under which the foundation has nearly completed.

However, the investor complains that it is very difficult to collect money at this moment.

The investor may even have to face a lawsuit to be raised by the buyers, who said that the payment must be made in dong under the current laws, while the apartment sale contracts, signed in 2008-2009, comprise the provisions about the prices in the dollar.

The rumour that real estate developers can make a profit of hundreds of billions of dong has made it more difficult for them to do business, as people have turned their backs to the real estate market.

The market's difficulties have become so serious that most recently, South Korean Inpyung Group, the owner of Daewoo-Cleve high grade apartment project in Ha Dong district in Hanoi has to "belittle itself".

The investor lends money to the buyers at the preferential interest rate of 12 percent per annum, so that they can have money to make payment for the second and fourth phases of payment.

The sum of money Inpyung spends to stimulate the demand for its project may make nothing if compared with the huge total investment capital of 420 million dollars. However, the move can truly reflect the current situation.

While Inpyung has been facing difficulties with its project, another investor, also from South Korea - the investor of Keangnam Landmark Tower - proved to be luckier. It could sell 1000 apartments quickly at the prices of 3000 dollars per square meters.

However, the time when apartments can sell like hot cakes is over. Nowadays, real estate products have been selling very slowly despite the price discounts and preferential conditions in making payment.

CBRE, Knight Frank or Savills Vietnam, the most well known real estate service providers in Vietnam, all have reported that the liquidity of the real estate market in Vietnam has been decreasing steadily with the sales of the next quarter lower than the previous ones.

"The real estate market has never before been so difficult as nowadays," commented Nguyen Van Kha, Chair of the Tu Liem Urban Development Company, about the current situation of the market. Meanwhile, experts believe that the prices would decrease
further in 2012.

Experts differ about property market's prospect

Some property experts expect the market to improve early this year though most say it will continue to face difficulties, at least to the end of the second quarter.

Some property experts expect the market to improve early this year though most say it will continue to face difficulties, at least to the end of the second quarter.

The optimists hold that government efforts will help the market recovery, saying now is the chance for buyers with actual demands for housing to make good bargains.

After the long Tet holiday, most property exchanges in Hanoi have resumed operation.

Some have signed their first contracts of the year for brokerage of apartments, residential land or semi-detached houses.

A representative of the property exchange Phuc Thinh in Hanoi said his office had successfully brought back two apartment purchase contracts in Dich Vong and Xa La on the first opening day after Tet.

Since early January, the two offices of this brokerage firm have won four apartment and land contracts compared to the five signed in the last quarter of 2011.

Explaining these positive signs, the representative said some investors deemed it good luck to make transactions at the beginning of a new year.

Meanwhile,those in need of housing are also taking advantage of the low season after Tet to look for houses at reasonable prices.

A popular area in Hanoi is Thanh Tri District, which is not too far from downtown.

Residents in Duyen Ha Commune, Thanh Tri District said that after Tet, many people had come to seek residential land and some successful transactions had been made.

Representatives of many other real estate trading floors in Hanoi show optimism about the market's short-term outlook.

However, property experts say the market may not prosper much this year since funding for the sector still depends heavily on the banking system. If interest rates are still high, the market cannot thrive.

Furthermore, Nguyen Van Duc, director of Dat Land Real Estate Co., said many cashstrapped investors would sell their projects to pay their debts. If the situation worsened this year, many investors would have to restructure their financing sources.

If the central bank flexibly and selectively relaxed its credit policy for the property market, and if proposals by ministries were approved by the government, the market could make some recovery, but not until the third and fourth quarter of 2012, said a representative of the Vietnam Real Estate Association. In fact, apart from a few small transactions, many big projects in Hanoi have not recorded positive changes in their sales.

A project on Kim Dong Street has attracted much attention because of the selling price of only 18 million dong per square metre, coupled with autos as gifts, to improve the sluggish pre-Tet sales.

Some 22,000 apartments of 60 projects will be launched in Hanoi this year, according to a report by CBRE. This will put more pressure on property developers as trading volume is expected to stay low and the percentage of successful deals insignificant.

Besides, they will have to compete with investors involved in land lot selling projects, who have pulled down their prices sharply in last year's fourth quarter.

CBRE said the future developments of the market would depend much on the recovery of the economy.

By the end of 2012, the housing projects whose prices are 21 million dong per square metre will stay resilient. Besides, the luxury projects in downtown Hanoi and HCM City will catch the attention of financially capable investors and families.

Thursday, February 9, 2012

Vietnam property market still unpredictable

Most property experts have said the market will continue facing difficulties, at least to the end of the second quarter, while some expect the market will begin improving early this year.

Those in charge of business of the property projects hold a positive view that the efforts of the authorities and the banking sector will help pull up the market. They explain now is the chance for buyers with actual demands for housing to make good bargains.

The Saigon Times Daily’s observations show that after the long Tet holiday, most property exchanges in Hanoi have resumed operation. Some of them have signed their first contracts of the year for brokerage of apartments, residential land or semi-detached houses.

A representative of the property exchange Phuc Thinh in Cau Giay District, Hanoi says his office has successfully brought back two apartment purchase contracts in Dich Vong and Xa La on the first opening day after Tet. Since early January, the two offices of this brokerage firm have won four apartment and land contracts against the five signed in the last quarter of 2011.

In explanation of the prospering business since early 2012, the representative says some investors deem it good luck to make transactions at the year’s beginning. Meanwhile, those in need of housing make use of the low season after Tet to look for houses at reasonable prices.

Thanh Tri District is where Hanoi citizens aim at as this area is not too far from the downtown area. Residents in Duyen Ha Commune, Thanh Tri District say that after Tet, many people have come to seek residential land and some successful transactions have been made.

Representatives of many other real estate trading floors in Hanoi show optimism about the market’s short-term outlook.

However, property experts say the market may not prosper much this year since funding for the sector remains heavily dependent on the banking system. If interest rates are still high, the market cannot thrive.

Furthermore, Nguyen Van Duc, director of Dat Land Real Estate Co., says many cash-strapped investors would sell their projects to pay their debts. If the situation worsened this year, many investors would have to restructure their financing sources.

If the central bank flexibly and selectively relaxed its credit policy for the property market, and if proposals by ministries were approved by the Government, the market could make some recovery, but not until the third and fourth quarter of 2012, said a representative of the Vietnam Real Estate Association.

In fact, apart from a few small transactions, many big projects in Hanoi have not recorded positive changes in their sales. A project on Kim Dong Street has attracted much attention because of the selling price of only VND18 million per square meter, coupled with autos as gifts, to improve the sluggish pre-Tet sales.

Some 22,000 apartments of 60 projects will be launched in Hanoi this year, according to a report by CBRE. This will put more pressure on property developers as trading volume is expected to stay low and the percentage of successful deals insignificant.

Besides, they will have to compete with investors involved in land lot selling projects, who have pulled down their prices sharply in last year’s fourth quarter.

The property service provider says that the future developments of the market will depend much on the recovery of the economy.

By the end of 2012, the housing projects whose prices are VND21 million per square meter will stay resilient. Besides, the luxury projects in the downtown Hanoi and HCMC will catch the attention of financially capable investors and families with deep pockets.

(Source: Saigon Times.)

Friday, December 23, 2011

52% of inward remittance poured into property market

This year’s remittance to Vietnam is estimated to have reached $9 billion; up nearly $1.5 billion compared with 2010, according to data of the National Finance Supervision Committee, up to 52% of the remittances has been poured into the real estate market.

Turnover of Vietinbank’s money transfer and remittance trading office in 2011 is expected at over $1.3 billion, the highest figure of the bank so far. A representative of Vietinbank said, the estimated remittance inflow of $9 billion was the impressive figure and most of the amount was invested in property.

Such a high remittance came from Vietnamese overseas (Viet kieu) that sent money to support their relatives, a large part was investment in realty. Business and working operations of Viet kieu faced a lot of difficulties so they tended to transfer money to the homeland for investment, Mr Ngo Xuan Hai, Head of the office explained.

Archi Investment Joint Stock Co, investor of Nine Ivory Project revealed that despite being opened in the gloomy phase of the real estate market like present, they still gained a considerable number of customers who had inward remittances by the year end. Actually resort property allows long term investment and high profitability, matched with the investment demand of Vietnamese living in foreign countries.

The overseas remittance contributed well to the liquidity of real estate market, especially the resort property segment, said Nguyen Thanh Trung—Director of Nine Ivory Resort Project.