Vietnam Real Estate Market: Capital-seeking Stimulus

14 Feb
VNRE – Tightened credit policy that favours a high restriction on loans for tightening non-productive areas to curb inflation has caused the Vietnamese real estate market to fall short of capital. Therefore, a lot of investors have resorted to stimulus measures to raise funds to restart their projects.

Promotion race
According to a survey by Colliers Vietnam, the investor of Thang Long No1 project located on Thang Long Highway, is offering at VND35 million per square metre. The project, which consists of two office towers and three upmarket apartment blocks, has a total area of 40,000 square metres. This will be a prominent landmark in the overall architecture and landscape planning of the space surrounding the National Convention Centre.
In addition, to stimulate demand, many investors continue with their hefty promotion programmes. Daewoo Cleve located on Le Trong Tan Street, Ha Dong District, is offering at VND25 million per square metre. The investor of this project has collaborated with banks to provide soft loans bearing annual interest rate of 12 percent and buyers can borrow up to 25 percent of apartment value. Buyers pay interest on a monthly basis while principal payments are delayed to the end of the first quarter of 2014, when the house is transferred to buyers. This is a high-class international standard apartment close to major trade centres, financial centres, hospitals, international schools and local administrative bodies. Once completed, the project will provide the market with more than 4,506 apartment units.
Sky Garden located in Dinh Cong ward is also offering incentives to buyers in the first round of capital contribution. For quick capital recovery, the seller agrees to discount 10 percent if buyers settle 80 percent of the house value. The investor of Tan Tay Do Apartment project also offers a discount of 2 percent to its customers, while Green Park project presents interior furniture voucher worth VND50 million. However, these demand-driven stimuli still turn out to be not attractive enough to customers.
Creating competitive product lines
According to experts, the Vietnamese property market is typical of supply and demand contradictions (supply rises but demand falls and vice versa). However, this seems not to be the case in 2012, because the wide gap between demand and supply has inflated the price of property assets like a balloon. In case of oxygen insufficiency, the balloon begins to deflate and possibly bursts.
Previously, many experts had warned against oversupply. Actually, at present, many projects have come to a halt due to capital shortage. According to market surveys, sharp drops are seen in high-grade segments. Prices have slid by VND10 – 12 million per square metre. A few house deals with prices ranging from VND35 million to VND40 million have been reached recently. However, there is a little decline in downtown house prices.
It is obvious that investors must create product lines different from the rest of the market. First, they must launch more competitive prices. Second, they need to build houses with small areas which are affordable to more people.
Source: KTDT | VCCI News
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