Archive | October, 2008

Real-Estate-For-Tourism market sees new investment opportunities

20 Oct
Foreign investments in the Real Estate for Tourism Development market have been flowing into Vietnam, according to the Ministry of Planning and Investment (MPI).
According to the MPI, 18 out of 487 projects that were licensed during the first six months of this year were tourism-hotel projects, and capitalized at nearly $4bil. Five out of the eight biggest projects announced by the ministry were projects that fell into the field of real estate for tourism.

Experts believe that the number of projects in the tourism-hotel field will further increase during the last months of this year, and continue to grow for the next 2-3 years.

The experts have every reason to believe this as the number of foreign tourists to Vietnam is expected to increase over the next few years with Vietnam being considered as a new attractive destination.

In 2007, Vietnam received 4.2mil foreign tourists and served 20mil domestic tourists. The Vietnam National Administration of Tourism (VNAT) has forecasted that there would be 6mil foreign tourists to Vietnam by 2010 that would stay for an average of 4.6 days.

As such, Vietnam needs more high-grade accommodations to meet this increasingly high number of tourists. Currently, Vietnam is seriously lacking high-grade hotels. The 5-star Daewoo always sees room occupancy reaching 85-90%, while Melia sees 95% during the high season. The ratio of net profit on the total turnover at luxury hotels in Vietnam is relatively high, at 20-35%, with which Vietnam is described as being an attractive cake for investors.

Experts said that in terms of material facilities and infrastructure, Vietnam nowadays still lags behind where Bali was 28 years ago. Therefore, it is expected that the accommodations in Vietnam will increase rapidly from 9,000 hotels in 2007 to 13,500 in 2010.

On October 2, the project on Vinpearl Hoi An sea ecotourism in the Cua Dai sea area was kicked off. Vinpearl Hoi An Resort will comprise of a 5-star hotel and 35 luxury villas, covering an area of 70,277 sq m. The VND300bil project is expected to be put into operation in the first quarter of 2010.

Source: VnMedia

Land transport conference opens

18 Oct
Urban transport planning and sustainability, technology advancements, transport financing and investments, intelligent transport systems, road safety as well as critical insights into Viet Nam’s road and rail development plans have been highlighted during a two-day conference in Ha Noi which kicked off yesterday.
The conference known as Viet Traffic is supplemented by an exhibition which features solutions and technologies for railway infrastructure, highway construction and management, roadside accessories and public utilities, ITS for traffic management and safety, parking facilities and systems and management..

Delivering a speech at the conference, the director of the Foreign Investment Agency Phan Huu Thang told participants that the completion of a modem transport infrastructure system was one of the key missions of Viet Nam’s Government.

He said that over the past few years, Viet Nam had made great strides in transport infrastructure development with a view to developing the country’s socio-economy.

“We hope that by 2020, Viet Nam will become a modern industrial country with a developed transport infrastructure bringing economic benefits to all,” Thang said.

“We strongly believe that through the conference and exhibition, participants will discuss solutions and share experiences in order to seek ways to make joint-venture businesses and co-ordinate to improve and develop Viet Nam’s infrastructure facilities in the years to come.”

Mai Anh Tuan, vice chairman of the Viet Nam Road Administration, told delegates about road development plans and future challenges. Viet Nam’s land transport and services remained very poor and it wouldn’t be easy to address the existing problems within a short period of time.

Regarding Build-Operate-Transfer (BOT) investment in traffic infrastructure, Tuan said motorcycles remained an essential mode of transport for Vietnamese people. The Viet Nam Road Administration would seek ways to gradually to solve traffic problems due to the high ratio of motorbikes, while encouraging automobile development in an appropriate manner.

The number of cars would climb to around three million units by 2020 and motorbike would be between 33-36 million units.

He added that road fee collection remained unreasonable in the country and was lower than other countries. The Viet Nam Road Administration would revise road fee collection procedures so as to encourage B.O.T investment in road infrastructure. By doing so, support from both international and domestic professionals would be a need.

The Ministry of Planning and Investment’s decision to allocate huge transport infrastructure funds before the end of this year signified a major demand for infrastructure support from both local and international players to cater to the rapid development of more transport projects in Viet Nam.

Viet Nam’s robust economic growth is accompanied by an urgent need for a good transportation network and infrastructure. As a result, major projects are underway to build more ports, highways, railways, roads, bridges, tunnels, interchanges, overpasses, car parks and other auxiliary facilities.

The country plans to develop 6,000km of expressways by 2025, with 261km of expressways designed for high-speed travel to be built each year until 2025 at an estimated total cost of $22.8 billion.

Viet Nam’s Government has set aside billions of dollars to be invested in numerous mega-scale road and rail projects. In HCM City alone, the total estimated investment capital needed for road, railway and waterway projects planned will be $13.9 billion while Ha Noi’s total investment into transportation projects is estimated at about $13 billion.

Source: Vietnam News

Capital-starved property market to remain comatose, realtors say

18 Oct
Property sales remain sluggish in Ho Chi Minh City, especially in newly-developed projects and apartments, realtors said, blaming it on banks’ credit-tightening which may last until the middle of next year.
Prices of most new apartments remain rooted, while those of project land lots have fallen slightly after a short-lived hike last month, they said. Projects refer to government-approved land that is designated mainly for building row houses and sold by developers.

Pham Hoang Huu Bac, business manager of Nha Xanh real estate company, said apartments in the city’s northwestern area have seen a drop of VND2-3 million per square meter. His company has recorded no transactions or customer inquiries into project land though many people are seeking to sell their land.

On the other hand, many deals involving houses in outlying residential areas are being done, Bac said. Most buyers lived in other provinces and bought the houses for VND500-700 million for their children who have begun studying in the city this school year, he added.

Most realtors and analysts agreed the market would remain comatose, with prices falling even further, until the second quarter of next year at the earliest.

The government’s tight monetary policy and banks’ caution while lending against property, which have cut off funds for both developers and potential buyers, would remain in place for some time, they pointed out.

The stock market, which thrived and fueled the real estate bubble last year, has performed badly this year, with the Vnlndex falling to a third of its all-time high last year.

The global financial crisis, which has hit Vietnam’s major export markets, would also hurt the real estate market of the export-oriented economy until next year, the VnExpress newswire quoted Adam McCarty, chief economist of the consulting Mekong Economics Company, as saying.

The market could only expect to improve if there are positive changes in the macro economy, monetary policy and legal system, he was quoted as saying.

“The market can only revive when the capital valve is open,” Nha Xanh Company’s Bac said. “We expect fresh signs on the real estate market in March 2009,” he said without elaboration.

However, some-analysts forecast an increase in the number of transactions by year-end when many investors may have to make distress sales of properties cheaply to repay bank loans.

Bad debts

After the real estate rush last year, property-backed loans are higher than currency reserves and pose a risk to the economy, the Vietnam Investment Review said recently, citing Le Xuan Nghia, head of the central bank’s Banking Development Strategy Department.

Total loans collateralized by property are as much as VND500 trillion (US$30 billion), the report said. The risk is still less than in markets such as the US where 70 percent of bank loans are backed by property assets, Nghia said..

Vietnam’s currency reserves increased to $21.9 billion by the end of September, central bank governor Nguyen Van Giau said recently.

No meltdown

But Do Thi Loan, secretary general of the Ho Chi Minh City Real Estate Association (HOREA), said the real estate market is just “getting back into order” after a period of overheating in the last two years.

“The property market is not frozen and hasn’t gone into recession like many people suggest,” Loan said in an interview with Bloomberg last week. “Foreign direct investment is still pouring into the property sector. Of the $47 billion FDI in Vietnam in the first eight months, 50 percent was committed to property projects.”

In Ho Chi Minh City, 85 percent of the $7.9 billion FDI in the period is set to flow into real estate, she said.

“Many Singaporean and Malaysian real estate developers have visited our organization in the last few months to look for property projects,” she added.

The real estate market’s attractiveness lies in the country’s young population and rapid urbanization. About 70 percent of the country’s population of 86 million is aged below 35, official statistics show.

“These people will need to get married and a place to live,” Loan said. “This will sustain a huge demand for housing.”

The Ministry of Construction has predicted that 45 million people will live in urban areas by 2020, she said.

“Vietnam will need a lot more construction of residential and office buildings and factories in the next 10 years.”

Source: Thanhnien News

Realty experts see potential in mid-range apartments

14 Oct
Property investors and experts, speaking at a recent international real estate conference at New World Hotel in downtown HCMC for a panel discussion and experience sharing, said they were pinning hopes on the mid-range apartment market segment.
Many project owners and investors have found it hard to seek funds for their apartment projects due to the bank credit tightening, which has hit the real estate market. Meanwhile, experts look optimistic, saying there is a strong demand among mid-income people who are in need of apartments.

Experts said increased risk and decreased selling prices were discouraging speculators who at a certain time dominated some 60% of real estate transactions, and that they saw potential in the middle class market in the years to come if property developers knew how to tailor their products to meet the demand.

Brett Ashton, managing director of Savills Vietnam Co., shared his experience with investors at the conference. He said that thanks to young population, aging under 35, HCMC was emerging as a promising market for real estate investors.

He noted the property market has seen a fall in prices of high end apartments but people could not still afford to buy due to tight credit. A small drop in mid-end ones is good for investors to take the middle class segment into consideration, he said.

Therefore, an apartment costing around US$80,000 to US$150,000 each is within the reach of many young families who need a smaller size apartment as a starter home, he said.

Like other experts who foresee potential in accommodation among new and young families, Ashton gave investors an outlook about the local property market, citing the figures of the HCMC Statistics Office saying that the city’s population was forecast to reach 10 million by 2010 and 16-17 million by 2025, and that the city last year saw some 49,000 couples getting married, who traditionally live with their families but would search for their own homes for privacy and independence.

He added another chance would come to investors from the emerging middle class, white-color workers with rising income, and that once a white-color couple with dual income around US$35,000 to US$50,000 per year, such an apartment would be obtainable.

Ashton, however, said that developers think about their project location that was suitable for local buyers, not for foreigners, and it could be anywhere such as districts 2, 7, 5, 10, Binh Thanh, Go Vap but the central business districts.

He noted the increased transportation infrastructure was effecting on new residential developments, new urban areas, travel times and safety, making location less important than price.

Source: Saigon Times

Experts remain optimistic about Viet Nam property market

14 Oct
The Vietnamese real estate market is still attractive and has potential for development, participants said at the 7th International Real Estate Federation Asia Pacific conference held in Ho Chi Minh City last week.
Rising property market

Matthew Koziora, sales and marketing director for VinaCapital Real Estate, said foreign firms have a great opportunity for investment in the realty sector in Viet Nam, especially HCMC, since the country has excellent growth prospects, an administration increasingly open to foreign and private sector investment, and increasing demand for accommodation.

He pointed out that the southern city now has just 15 shopping malls and department stores measuring a total of 150,000 square meters – a number insufficient to serve the increasing number of foreign tourists.

Around 50,000 expatriates live in HCMC but only 3,000 serviced apartments are available.

With international arrivals on the rise, the city also faces a shortage of hotel rooms, Mr. Koziora said. There are fewer than 7,000 three- to five-star rooms.

In the first half of the year, 2.2 million foreign tourists came to HCMC. Some 4.5 million foreign arrivals are expected this year, he said.

The city also needs tens of thousands of apartments for low-income people and millions of square meters of housing for disadvantaged people, he added.

The country has attracted US$57 billion in foreign direct investment this year, with a large portion of it pledged in housing, resorts, and hotels, clearly revealing that foreign investors are interested in the property sector.

Marc Towsend, managing director of CB Richard Ellis Company, said demand for apartments is thriving after ownership regulations were improved, ensuring the sector’s growth and boosting investors’ confidence.

He named some successful housing projects like An Vien in District 7 and E Home in District 9, adding they are successful because, at $800-1,100 per square meter, their prices are reasonable.

Do Thi Loan, secretary general of the HCMC Real Estate Association (HoREA), viewed the city’s rising population, with 85 percent of its people living in urban areas, as an opportunity for investment in residential projects.

She also cited Viet Nam’s position among the world’s 10 most attractive retail consumer markets as another positive factor for real estate development.

Truong Trong Nghia, president of the city’s Investment and Trade Promotion Center, said the Government’s 2020 target of turning HCMC into a metro of 10 million with hi-tech industries, high-end services, and science and technology facilities would be an engine for growth.

The Government also plans to increase the average housing area from the current 11.5 square meters per person to 17 square meters, he added.

Mr. Nghia also cited projects that have been approved and are awaiting investment – like the new urban centers in Thu Thiem and Cu Chi and expansion of Tan Son Nhat Airport – as cause for optimism.

Difficulties still ahead

Local participants at the meeting were apprehensive that foreign investors would replace them in the realty market since they have been forced into inactivity by the sluggishness of the market and tight credit policies.

HoREA chairman Le Hoang Chau said the country and city realty markets would recover only in late 2009.

The demand for housing is increasing, but the market depends mostly on bank funding, he said. Bank interest rates are still high at 18-21 percent that buyers are waiting for them – and also housing prices – to fall.

Mr. Chau said the incomplete legal system, tortuous formalities, and sluggish land clearance have slowed down property projects.

Source: SGGP

Real estate market report (Oct 2nd – Oct 9th)

14 Oct
The real estate market will have more fluctuations
Credit for real estate is the hottest subject mentioned by popular means of communications last week. Although banks “have slightly opened the door” to re-lend to those customers having demand for buying properties, disbursement still has difficulties in the frozen property market.

Lending is not easy

With an average price of 1800USD/sq.m, apartments of Richland Hill project (Dist. 9, HCM City) have attracted many customers. Dong A Bank offers preferential loans to most of them. Before that, HSBC and MHB have lent to those who buy apartments of Sky Garden (Phu My Hung) with preferential interest rate. Moreover, Sacombank is now lending up to 70% value of Phu Loi No.1 apartment (Dist. 8, HCM City); Viet A Bank provides with hire-purchase of E-Home apartments (Dist. 9, HCM City) within 15 years; ACB even operates home restoration services, etc.

Other banks such as HCM City VCB, Eximbank, MB and so on are considering lending documents after raising credit standards and filtering customers. However, these banks didn’t offer loans as the time of the end of 2007, but now mainly focusing on some projects they know thoroughly and have had business relationship before.

Mr. Le Xuan Nghia, Director of the Banking Development Strategy Department under the State Bank of Vietnam analyzed that the total of realty outstanding loans by September 30th, 2008 is 115, 500 billions VND – 9,15% of total liabilities of the whole system. He said that the State Bank of Vietnam has no terms of banning from property loans, and that commercial banks have closed the real estate market recently due to uncontrollable risks of their easy loans.

Banks’ lending to buy the properties again is not only a good sign for the market but also for some banks having abundant capital. Moreover, except for some banks lending with preferential interest rate of 17-18 percent per year, many banks are lending at 20 percent per year on average. This is an interesting interest rate in its decreasing trend as present.

However, according to the evaluation of experts, capital disbursement in the realty market is not easy any more like in 2007, particularly when people having housing demands are also hesitating about banks’ interest rate pressure. Besides, it is said that the real estate market is likely to slope down towards the risk of increase in bad realty debts. Properties will be released in some next months when contracts get maturity date, but the real estate market is still frozen. The fact is that most mortgage assets of banks are properties. If the real estate market has difficulties, it will put pressure on the enterprises in debt payment. As a result, this makes the market continue to go down.

Real estate needs more capital

Some economic experts advise at this time that banks should continue to extend the real estate loans to avoid great breaks in this market-related credit system. MA Le Xuan Nghia has said that banks’ stop of the real estate lending causes the market to become cold but also brings about other consequences. Many projects are 80-90 percent finished but not continued to implement because of capital shortage, which will result in the bankruptcy of enterprises. According to Mr. Nghia, it is necessary that banks should restructure all debts to continue lending so that the enterprises finish their projects as scheduled. As a result, the enterprises can collect their money, the banks can withdraw their debts and the real estate market will have the opportunity to develop strongly again.

Up to now, all enterprises, authorities and policy makers have begun to be interested in difficulties of the real estate projects. As to the Decree 153/2007/ND-CP on instructing to execute Real Estate Business Law, one of the conditions for the enterprises to transfer the whole or a part of new urban projects, housing projects, infrastructural projects of industrial zones is “site clearance completion and infrastructural work equivalent to approved speed of construction”. MA Le Xuan Nghia has told that with this regulation and the capital stalemate for the real estate projects, if the banks don’t classify the projects to fund for some investing projects, this will make the real estate market more difficult.

The investors also suggest the government to widen conditions of project transfer or that of capital reception from homebuyers.

Office rent price continues to drop

Last week market’s the prominent characteristic was office rent price decrease. Offices for lease, especially in HCM City, begin to change remarkably together with macroeconomic fluctuations; causes the enterprises become more prudent in term of office construction. On the first week of October, grade-B office rent price (not be located in Dist. 1, HCM City) is down to 35-45 USD/sq.m/month. According to CBRE Vietnam’s forecast, office rent price will continue to drop about 10-15 percent in late of 2008 and early of 2009. The volume of renting newly-built offices has begun to fall gradually. At present, some buildings in district 1 and 3 are finished, therefore, there is still much space for lease.

The plentiful source of supply and competitiveness are the reason of quick drop in price in term of offices for lease. In Hanoi, small office construction (grade-C) is considered as a feasible and profitable solution at this moment. In the wave of the businesses moving from grade-A, grade-B offices to grade-C ones or finding renovated houses to rent to cut down costs, executive director of Tai Tam & Colliers International Co., Ltd. has said that real estate management companies and agencies also find easy to look for customers for small offices because median – and small enterprises take majority in Vietnam.

Source: Saigon Times

$57bil of FDI is just registered capital: GSO

14 Oct
Bui Ba Cuong, Head of the National Accounts Department under the General Statistics Office (GSO), affirmed that the figure of $57bil worth of foreign direct investment (FDI) released by GSO is a reliable figure, which, to some extent, reflects the country’s FDI attraction.

Some experts have doubts about the $57bil of FDI figure released by GSO, saying that GSO is trying to ‘beautify’ the figure; it does not show the real picture of FDI in Vietnam.

Cuong has denied this, saying that $57bil is an exact figure. However, he adds that this is just registered investment capital, while funds for many big projects, capitalised at $9-10bil, have not been disbursed yet.

Why doesn’t GSO make statistics based on legal capital? This ways seems to give more reliable figures as it shows the capital committed by investors.

The legal capital is the minimum capital investors need to have when undertaking a project. However, legal capital is only set for some business fields like stocks, insurance, money trade and gold trade. Investors have to spend the sums of capital they commit.

However, the investments still depend on investors’ strategies. In some cases, they do not implement projects even five or seven years after they commit the investments.

As I said before, the registered capital can only show the status of our investment environment.

Other countries calculate actual FDI capital by counting the foreign capital transferred through the international payment system. Why don’t we use this method?

It is true that the net FDI figure in the international payment balance can reflect the foreign capital inflow into Vietnam. However, this method does not allow us to count the capital and projects that originate from foreign investors in Vietnam.

Why don’t the monthly and quarterly socio-economic reports by GSO show these figures, which prove to be basic macroeconomic figures?

Figures about capital balance and current balance announced by the International Monetary Fund (IMF) come out later than GSO’s reports. It is because GSO has to report earlier to the government to serve the government’s management work. Therefore, GSO’s figures are just estimates.

Moreover, under Government Decree 164 on Vietnam’s international payment balance management, only the State Bank of Vietnam has the right to announce figures about international payment balance.

Do you mean that the announcement of the figures is the responsibility of the State Bank of Vietnam?

Under the current laws, statistics about capital balance, currency balances… are national secrets.

In general, there are many ‘no-announcement zones’. We produce many figures from the figures provided by the State Bank, but when we announce the figures, we cannot reveal the bank’s figures, and as we do that, people sometimes have doubts about our figures.

(Source: TBKTVN)