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Rescuing the Real Estate Market: Stuck with Output

20 May
Realizing that real estate enterprises are facing a lot of difficulties when their products are frozen due to the lack of consumers for months, banks recently have started to “save” these enterprises with credit support packages. According to experts, this move is also a solution for banks to save themselves, when many of their debts to the real estate sector are overdue.
Finding ways to unfreeze capital flows
The most impressive comes from the Bank for Investment and Development of Vietnam (BIDV) with the model “Linkage of the 4” aiming to save the real estate market. Accordingly, in May 2012, BIDV will continue its capital support package and payment guarantee for the 4: project owner, contractor and supplier of building materials, as well as the bank. This solution will ensure payment among project owner, contractor and supplier of building materials in order to provide products as soon as possible. BIDV will launch the support package in the two largest markets, Hanoi and Ho Chi Minh City.
BIDV’s move is hoped to stimulate consumer demand, as well as make a precedent for other banks to follow. Before the model “Linkage of the 4”, BIDV was one of the first banks to launch credit support package with the value of VND4,000 billion, lending money to those who buy houses in projects financed by BIDV, at an interest rate much lower than other banks (16 percent), and loan limit up to 85 percent of the house’s value. Although the package was launched only in Hanoi and Ho Chi Minh City, it is easy to understand that bank and project owners could apply the rescue policy only where most products are in stock.
According to Mr Tran Bac Ha, Chairman of BIDV, when launching the policy of reducing interest rate for home loans, BIDV lost VND 1,200 billion – VND 1,500 billion. This was a risky step in the context of most real estate enterprises suffering difficulties. According to statistics, many banks such as Vietcombank, Eximbank, Sacombank, and Agribank still have capital stuck in real estate, and they have not had a turning point regarding credit policies. Consequently, remarkable troubles between banks and real estate enterprises – banks’ borrowers will potentially develop.
Output is still stuck
The bankruptcy of real estate enterprises is certainly the most undesirable thing for banks at this time; however, how to save these enterprises from bankruptcy does not depend only on banks. Whether banks can re-trace loans, freeze loans or keep pumping capital for project owners to complete their projects, the most important factor, the output for products, is not solved. Enterprises are short of necessary capital to operate, products are not moving, and consequently banks also stand to lose considerable income. If this situation keeps going on for a long time, at a certain point, banks will not be able to support enterprises and will have to find ways to save themselves by solving loan-secured properties. At that time, not only enterprises will go bankrupt, but also banks probably will go bust in line.
While many real estate enterprises suffer heavy losses, some are determined not to lower prices of their products. It was believed that when Hoang Anh Gia Lai decided to discount 50 percent of their apartments, the real estate market would be in a sharp price discount trend, however recently project owners only lower price as a promotion. SC5 Company even declared that they would never dump prices of their products.
The line between survival and death is clearly visible. The terms of maturity, renewal and re-trace of loans have passed for a year, but product consumption ratio of enterprises remains almost equal to 0. If the situation remains the same to the end of 2012, many real estate enterprises will have to leave the market.
According to many real estate investors, policies have gradually loosened, but market liquidity has not improved, while interest must be repaid, the only chance for real estate enterprises is to wait for the city resettlement program policy of buying apartments.
Reported by Luong Tuan | VCCI News

Office Market in the Limelight

29 Apr
VNRE Ending the first quarter of 2012, the real estate market continued challenging the tolerance of investors, especially in the housing segment. The market is supporting end-buyers as housing prices are still on the downtrend and investors paying closer attention to customer requirements. Vietnam Business Forum summarizes the main events of the real estate market in the first quarter of 2012.

Housing market – Business ethics of primary investors

In the first quarter, the apartment market witnessed slow offering from investors. The supply was quite limited, with only 1,100 units, compared with 25,000 units in 2011. Not only buyers but investors are in a “wait and see” mode, pending market developments. New buyer-catching projects are mainly for low-income earners in Hoang Mai, Long Bien, Tu Liem and Cau Giay districts, Hanoi.

For the quarter, many projects were delayed or suspended although investors had sold apartment units to customers while many other projects still ensured construction progress although it was a bit slower. This highlighted business ethics and confidence of investors.

According to CBRE Vietnam Company, a property consultant and researcher, in 2012, the supply was forecast to reach 20,000 units. However, the real supply may be much lower if present market conditions keep lacklustre. The economy is showing signs of recovery; hence, the secondary price downtrend will slow down. Customers distrust investors’ ability to complete their projects, making construction progress and quality the top determining factor. For this reason, sale is better when the projects are nearing the final stage.

For villas and semidetached houses in urban zones, many wondered whether prices reached the bottom. Like three previous quarters, secondary prices continued to drop sharply in nearly 50 percent of projects in this quarter

Price decrease, despite lower than in the past quarter, remained at 5 – 10 percent. The degree of price reductions depended on construction progress. Newly constructed projects saw a 5 percent rebate, even 10 – 15 percent in some projects. Meanwhile, prices were slightly changed in completed projects. However, compared with rates in the first or second quarter of 2011, secondary prices in all projects slid 20 – 50 percent.

Buyers continued to wait because they expected further fall and they only looked for projects developed by reputable investors. Mr Richard Leech, Managing Director of CBRE, said the housing demand of end-buyers needs to be tested. Till now, the effect of recent interest rate cuts remains vague on the property market.

Office market – Positive signals

In the first quarter of 2012, the office market had no new supply, total supply stably approximated at 985,000 m2.

The Hanoi office market remains positive signs. Typically, the total newly rented area was over 14,000 m2, a high demand. Vacancy ratio fell to 25 percent from 30 percent in the previous quarter. According to statistics, nearly 390,000 m2 of office space are expected to enter the market in 2012. Experts said that rented area will hit a refresh record in 2012 although vacancy rates and supplies continue to rise.
In the western area, prices are forecast to slide to let more while owners in the downtown will not compete in price. In addition, investors will also apply more strategic steps. For new projects, investors can apply more competitive price policies for tenants and brokerage units. For old projects, they will focus on restoring and upgrading.

Retail space market – On the tenant side

After the special fourth quarter with three large commercial centre projects brought into operation, adding 109,500 m2 to the market, there were no new projects inaugurated in the first quarter of 2012. The total supply stood at 250,000 m2.

Occupancy rates across the market slightly slid although there were some big tenants like Home Entertainment Centre and New Cinema because their leased spaces belonged to others earlier, or from newly operated projects like Vincom and Centre Long Bien. In the downtown, the vacancy rate in the business centre was 5 percent, down 0.6 percent from the previous quarter, while vacancy rates out of the business centre was 14.9 percent. In the downtown, rents are quite stable because vacancy rates are unchanged. However, rates in non-business districts decline because of a rise in vacancy rates.

Serviced condos – more choices for buyers

Keangnam Landmark 72 opened in January 2012 with 378 serviced apartments for the area west of Hanoi. With this huge supply, the project has offered attractive incentives and promotions for customers. While rents offered by most investors were almost unchanged from the previous quarter, some projects, especially those in the west, were ready to negotiate rental prices to catch the attention of with customers in the face of competition from serviced apartments of Keangnam Landmark 72. Occupancy rate reached 81 percent, a slight increase from the previous quarter. Customers are interested in serviced apartments in the western region because many companies rented offices here.

Reported by Luong Tuan | VCCI News

Real Estate Market: Challenging Investor Confidence

27 Mar
VNRE – The freezing market has sent down real estate prices in Vietnam but investors do not feel the right time to invest in. According to Mr Stephen Wyatt, General Director of Knight Frank Vietnam, a property consulting company, investors never buy a product when the market is on the peak of a cycle. So, will real estate prices continue to fall more?

Heavy financial pressures
It is obvious that development potentials of the Vietnamese real estate market remain huge. Oddly enough, although the demand is very high, dozens of thousands of apartments are unsellable. This is because owners do not want to sell on expectation of higher prices while buyers want to wait for lower prices.
Indeed, this is possibly the best opportunity for long-waiting foreign investors to invest in. Currently, many foreign investors are ready to take over property projects invested by Vietnamese companies. At present, pressures are placed on the shoulder of domestic investors as they have to seek capital to ease financial strains.
Although prices have fallen to the lowest level in the past two years, it is hard to find a meeting point of buyers and sellers. The supply of well-located and affordable projects is thin, and vice versa.
Under this circumstance, both domestic and foreign investors prefer standing on the sideline and waiting for better policies. And, patience is seemingly rewarding when the State Bank of Vietnam (SBV) announced to cut ceiling deposit rates by 100 percentage points, laying the ground for the cut in lending rates. This is also the basis for many property experts to believe that the real estate market will recover towards the end of this year.
Medium and long-term opportunities
Remarking on the medium and long-term real estate market, Mr Stephen Wyatt said opportunities for investors are optimistically open. “We are seeing strong demand for many of the investments, land and developments sites that we are currently selling. With renewed optimism and a return of confidence, 2012 is the time to start looking at investing in Vietnam”.
The Vietnamese real estate market essentially enhances transparency and market laws to mitigate risks for domestic investors. The lack of transparency will lead to hearsay-based investment decisions.
Real estate companies, particularly small and medium ones, lack administrative systems, especially risk management. The lack of operating professionalism is a reason why they difficultly access capital sources and do not have the trust of customers. Thus, according to experts, real estate companies necessarily restructure to have healthy market development.
Mr Nguyen Huu Cuong, Chairman of Hanoi Real Estate Club, said: The property market will soon recover if the stock market gains stable growth and investor confidence as it is now.
He said the stock market and the property market always have close interactive relations. Positive development of the stock market will be clearly translated into the revitalisation of the real estate market. Thus, if the current growth of the stock market is maintained and continued, capital flows from this market will surely run into the property market.
However, it is extremely hard to identify what factors will determine the recovery of the real estate market. Real estate investing is typically driven by herd sentiment in Vietnam. Investors will jump into the market if they feel it is good enough but they will rush to exit if they lack confident. Hence, according to experts, the instability of the market is not over.
Reported by Luong Tuan | VCCI News

When Foreign Investors Dominate Real Estate Market

29 Feb
VNRE – There are signs of loosening credit for the property market, but the effect so far is not strong enough to wake up the long hibernating capital market. Grayness still covers the real estate market in early 2012.

Because of lack of capital, some projects have been forced to sell off, and many others are considering it. Therefore, in the near future, some projects are going to be divested. However, this is good opportunity for foreign investors to affirm their fame and take part in the Vietnam real estate market by replacing divested projects with their own.

Acquisitions and mergers

When real estate market loses its liquidation for a long time, most of real estate projects have to suffer from the loss for paying interest, especially for luxurious apartment projects, liquidation capacity becomes unreachable. But in reality, customers mainly focus on products with price of below VND2 billion.

Because of the tightening credit policy promulgated by the State Bank of Vietnam, many real estate companies are in trouble with capital mobilisation, additionally, negative effects of global economic downturn, high inflation rate and intensively fluctuated construction costs become the extreme burden for real estate companies, which do not possess a strong financial power.

While many completed projects can not to be bought by any customer, many real estate companies tend to sell or transfer part or all of their projects to foreign investors. In fact, Cuoc Cuong Sai Gon Company became a specific example pursuing to sell 65 percent (equivalent to VND121.2 billion) to Capita Value Homes Company, a subsidiary of Capita Land Group. Furthermore, this company also buys many other projects form Vietnamese investors.

Besides that, the Japanese Tama Home Group also marked its appearance in buying 20 percent of shares of Cotec Investment and Land-house Development Joint-stock Company, a member of Cotec Group.

Whilst many Vietnamese real estate companies are distressed by the frozen real estate market, some foreign investors are still confident to invest in Vietnam market. Particularly, in 2011, Indochina Capital – one of the leading real estate investment funds of Vietnam with annual revenue of US$40 million committed to continuously invest in many projects of Vietnam in 2012.

Mr Peter Ryder – Chief Executive Officer of Indochina Capital believes that recent difficulties of Vietnamese real estate companies have become opportunity for further development of Indochina Capital. According to him, the range of market demands is still large, especially projects with right location and competitive price are still concerned by customers. Foreign investors also have the same point of view that after recently frozen period, Vietnam real estate market will become warmer and strongly develop.

Opportunity or risk?

With both of objective and subjective challenges, many real estate companies must make acquisition and merger even they may be stuck with some difficult matters, for example: legal framework is not tight enough, transparency of the market is not high, procedures are complicated…

However, regarding many real estate experts, many acquisitions and mergers were realised. Mr Nguyen Huu Cuong, Chairman of Ha Noi Real Estate Club said: “In order to see the overall picture of all acquisitions and mergers of real estate companies and, we have to wait until 2012 when old real estate companies will be took place by the new ones, then we can acknowledge how much it will be and what will be the names to be replaced.”

The opened outlet for domestic real estate companies will invisibly create a very bad and dangerous precedent for real estate market because of not only economic matters but also security factors. Mr Nguyen Huu Cuong said: “If domestic real estate companies cannot find the way to unify, some better off investment projects would be transferred to foreign investors. And this situation cannot be controlled, because we are in the integration process. In the next few years, what will happen if projects with prior location belong to foreign investors”.

Accordingly, if companies do only care for themselves, they would not survive. The hardship will filter weak companies, but is it enough to build up the big domestic real estate groups, which are able to compete with foreign companies? Pursuing to some experts, domestic companies would rather unify and cooperate with each others to support resources among them than sell projects as retailers.

Reported by Luong Tuan | VCCI News

Challenge helps property market become more mature

15 Feb
VNRE – It is genrally agreed that with every challenge comes an opportunity, and the common saying is being used to talk about the local property market that has slid into difficulties since 2008.

Many developers, especially those who rely heavily on big loans from banks, keep lamenting their current situation because 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 once the gloomy market is not improved, they will sooner or later go bankrupt.
However, for many investors this is a good chance for them to come into the challenging market in a hope that they will stay ahead when the market is recovered from the downturn. High interest rate, credit restriction and inflation are problems real estate players, including foreign investors, are facing but those troubles are step-by-step being solved by the Government.
“Current difficulty in Vietnam is short term because inflation problem is one of things the Government has decided to tackle,” Colin Dyer, president and chief executive officer of Jones Lang LaSalle, shared his view to the Daily on the occasion of his first trip to Vietnam.
Observing the country from outside, Dyer said the Government was doing necessary measures to reduce inflation, and thus those problems would be short-lived. Overall, Vietnam and the rest of Asia are on a growth path thanks to having rising population and urbanization which can keep fueling commercial property market.
David Lyons, Vietnam Country Head of Jones Lang LaSalle Vietnam, echoed his president’s view, saying that the property services provider’s global network is 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, and we see that trend,” Lyons told the Daily.
Both experts reiterated the current difficult situation in the market, saying high interest rate has prompted very hard access to credits from banks. Across the board, it is not only development companies and investment companies but also individuals to see funds dried out for property investment. As a result, the housing price has dropped, and office rent is on downward trend because of abundant supply.
Given the difficulties, the local property market has witnessed many cash-strapped developers have to sell their projects to others. The merger and acquisition activity is expected to continue increasing, which means that more and more property projects are to change hands this year.
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. For example, the office building Centre Point on Nguyen Van Troi Street is being put up for sales after a local owner sold it to a Japanese fund, and now the fund has Jones Lang LaSalle to search for potential investors.
In another project, the property services provider is looking for suitable investors for a multipurpose project named Royal Tower in the urban town Phu My Hung in HCMC’s District 7. The 21-story building offers some 41,000 square meters for office and retail spaces and is expected for completion in June this year.
Besides, the company also acts as a broker for a commercial project named Lam Son Square in the resort city of Vung Tau.
Lyons said the company is 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 know and can understand the dynamic market.
Besides, the company is getting inquiries from American investors. Those potential investors are not only interested in office building sector but also industrial and logistic ones.
Lyons said there are developers looking to sell their projects to international investors. When there are more and more international investors looking into Vietnam, ‘that is the sign the market become more mature’.
Looking to the market trend, he projected that difficulties may be solved next year, and the local property market is hoped to go up again from the third quarter of this year.
Dyer seconded his colleague’s ideas, saying that the market downturn was painful for short-term real estate companies and for the whole market, but it helps companies to restructure business and capital to go through the difficult time.
Office rent continue softening
Like other cities in the world, as the office rent in HCMC’s central business districts dropped by half, it is the chance for companies to move in, to take some advantages to get good deals, Dyer commented on the office market in Vietnam.
Office rent in HCMC is on downward trend for 12 consecutive quarters with asking rent staying around US$32 – US$43 per square meter for Grade A building, some US$14 – US$32 for Grade B and some US$10 – US$25 for Grade C facilities.
According to the research team of Jones Lang LaSalle, the current difficult market conditions force some landlords, besides offering rental discounts or other incentives for long-term leasing contracts, to sell all or part of their buildings. This is an option for the developers to recover their capital quickly.
Total net absorption during 2011 reached over 168,000 square meters, a decrease of 9.4% 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 be double by the end of 2015.
Jones Lang LaSalle projected that this new level of supply will increase the vacancy rate in the HCMC office market, and thus rents could remain on a downtrend in 2012.
Reported by Dinh Dung | The Saigon Times Daily

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

Real Estate Market: In Search of Effective Fundraising Policy

7 Jan

VNRE – While global economic recovery is lethargic due to financial difficulties of leading economies, Vietnam issued new land management, fiscal and monetary policies in a bid to bolster macroeconomic stability. With respect to real estate field, the introduction of Decree 71/2010/ND-CP of the Government has created positive effects upon property investment and business. However, in practice, this policy also limits cash flows into real estate because of relatively stringent and rigid rules on fundraising. To learn more about this, Journalist Do Son of Vietnam Business Forum Magazine has an interview with Mr Nguyen The Diep, Vice President of the Vietnam – Germany Small and Medium Business Association, and President of Reenco Song Hong Investment Joint Stock Company.

What is your assessment of the positive effects of Decree 71 dated August 8, 2010 on real estate investment and business?
Real estate business requires huge financial resources. No matter how big a property company is, capital availability is limited. Therefore, they have to mobilise capital from outside sources like credit institutions, organisations, individuals and households to have enough resources for their business operations. Nonetheless, the introduction of the Decree 71 in lieu of the Decree 90 largely affected capital mobilisation of companies. But, it is undeniable that this ruling has certain positive effects on property market. In my opinion, the Decree 71 has three major positive differences in mobilised capital management of investors over the Decree 90:
Firstly, investors can mobilise capital by issuing corporate bonds, nonbanking institutions (investment funds, financial companies, etc.) and certainly loans from commercial banks.
Secondly, primary investors can transfer a part of their projects attached with infrastructure to secondary investors when their projects have completed site clearance.
Thirdly, property project investors can mobilise capital from individuals and organisations to build houses on profit-sharing or production-sharing principles on the basis of negotiation and sharing. But, this approach is not allowed to exceed 20 percent of total products of individual projects. Previously, according to Decree 90, investors entered into capital sharing or lending contracts before fixing products and executing.
So, Decree 71 will have positive impacts on the real estate market in some of the following aspects. Firstly, investors can develop capital sources and increase capital healthily and transparently. Secondly, the Decree specifies the time for evaluation and approval of projects. Housing projects with less than 500 apartment houses will be decided by district authorities and the time for this process is no more than 30 days. Hence, the supply of the property market will increase, helping balance supply and demand, ease local fevers and reduce risks for end customers. The process of making financial capital sources healthy is also a good element for the market, as fundraising must be carried out in a clear framework, not free as earlier. As a result, property investors will have better ‘health’ in the future.
But, it is said that this policy inhibits capital from flowing into the real estate market. What is your opinion about this?
That’s correct. Relatively restrictive regulations on capital mobilisation provided by Decree 71 and Circular 16 affect the rights to mobilise and attract investment capital. Specifically, these regulations provide lending from credit institutions and investment funds while not mentioning loans from other institutions and individuals. Investors are also not allowed to issue bonds attached with the preference rights to purchase apartment houses. These reduce the appeal of projects in the eyes of business partners. Worse, the time of raising funds for projects according to profit-sharing principle or production-sharing principles prevents investors from forming business cooperation with other partners in accordance with the Law on Investment.
In addition, the unclear definition of “mobilising a maximum of 20 percent” leads to different interpretations. Decree 71 and Circular 16 do not define what capital mobilisation means, but only apply the method of itemising contracts to define capital mobilisation. Using the itemisation method is not enough, because it drops many types of contracts as provided in Civil Code 2005, like the deposit contract which provides the guaranty of future contract signing and enforcement.
The business cooperation contract signing clause stipulates that in case of not having certificate of ownership rights and not receiving houses, business cooperation parties are not allowed to sign contracts with the buying and leasing parties, but transfer such contracts to investors to sign. This provision will raise difficulty for all concerned parties, reduce the autonomy of business cooperation parties, increase the responsibility of investors, and in fact cause disputes in case investors swindle.
According to Article 63 of Decree 71, authorisation contracts are not permitted for public notarisation for the purpose of restraining multiple transfers of houses. Nevertheless, such a regulation is not really fair to both investors and buyers because the trading of property products brings profits for investors. Therefore, this is also regarded as an important legitimate channel of capital mobilisation.
Notably, while a series of barriers in the Housing Law and the decrees guiding the implementation of Law on Real Estate Business are not eased, the ongoing credit squeeze will send the market to the hands of foreign companies. Decree 71 plus the tight credit policy provided in Circular 13/2010/TT-NHNN, which specifies that the risk ratio of credit to property investments is lifted to 250 percent from 150 percent and the ratio of credits for nonmanufacturing sectors like securities and real estate is reduced, has caused serious impacts on the real estate market and the economy as a whole.
It is believed that this is a war of life and death, but it will make the market better. I think this is right but insufficient, because the current situation is the upshot of many previous regulations and policies.
Do you have any recommendations to rescue the property market?
I think the most important thing is to improve macro management mechanisms and policies, and to ensure the maximal exploitation and mobilisation of domestic and foreign financial resources for housing development, property market development, and sustainable economic development.
Up to 70 percent of Vietnamese real estate businesses are small and medium-sized. Thus, many may collapse as a result of Decree 71 and tightened credit policy. State agencies should issue policies to balance and sustain development.

Source: VCCI News

Year- End Real Estate Market: Pressure for Big Rebates

21 Dec
VNRE – Vietnam real estate market has stepped into the final days in 2011. People’s lack of knowledge about the market has made it gloomier than ever.

Popular apartments to burst
While the medium and high quality department segments mostly stand still in the Vietnam real estate market even as investors have carried out promotion and discount programmes, the average quality apartment segment has attracted lots of interest. In mid November, according to the Northern Dat Xanh Services and Land Joint-stock Company, 75 of the total 90 flats of Dream Town Department (Tay Mo commune, Tu Liem district) with the price of VND17.8 million per sq.m have been sold in the first sale offering. Earlier, this secondary company was also successful in understanding the real demand of people, applying acceptable prices for Tan Viet project (Duc Thuong commune, Hoai Duc district), or Nam Do Complex project (in Truong Dinh street). With the price of around VND 15 million per sq.m, after a month, two major dealers have mostly sold out 150 flats of Tan Viet department, which was carried out by project owners.
In fact, customer demand currently concentrates strongly on segment of popular quality department with the price of around VND 14 – 22 million per sq.m. This definition becomes clearer when real estate market goes into turmoil. However, in order to have purchased products at this moment, project owners must have prepared for at least three years. However back then, medium and high quality apartments were so attractive to customers that few investors thought about it.
In another case, in early November, the information of PetroVietnam Power Land Joint-stock Company (PVL), a secondary company offering flats of Petro Landmark project (District 2, Ho Chi Minh City) with the price of around VND 15.5 million per sq.m pulled in a lot of customers. Regarding PVL representatives, there are hundreds of calls from customers to get information every day. Nevertheless, even though the set prices were considered to be attractive, the selling methods of PVL were not good enough, so the result did not reach expectation.
In the second half of November, the real estate market saw several apartment projects open, like: Golden Palace (urban district Ha Dong), and Green Villas (Hoa Lac). In December, Cleve Van Phu project also started sales when it had finished foundation work.
Furthermore, in Da Nang province, 90 villas and houses of the Empire project did not miss this opportunity to open sales in Hanoi after a period of exploration. The prices range from VND 5.2 billion to VND 6.8 billion, project owners the Thanh Do Group estimated that these prices are very competitive compared to other projects in the same area of Truong Sa line and Ngu Hanh Son district.
Difficulties from many sizes
As information on the real estate market becomes easier to access, it becomes also easier to assess project owners’ strategies. According to real estate experts, project owners who sell at an indifferent level or do not sell at all are those who have financial potential and save their products for further opportunities. Meanwhile, units selling forcibly now, either have prepared with different strategies, or are suffering financial pressure and are forced to sell their products.
The financial shortage and unstable macro-economic situation have obviously influenced people’s thinking. However, from the viewpoint of selling, businessmen also have their objective reason. Around the Tet holiday people’s money source is quite sufficient due to incomes gathered in a whole working year. Therefore, more people are ready to settle down, move, renovate their house or invest in a first property.
In another hand, capital inflows from people living overseas and their interest into the real estate market cannot be ignored. Besides sending money to support their family, their capital inflows run directly into the real estate market.
Mr Nguyen Minh Tuan, Deputy Director of Marketing Consulting Company CBRE, assessed that easing macro-economic indicators such as reduced inflation rate and banks loosening property loan policies are a good premise; in addition, the abundant money savings of people will also liven up the market at the end of year.
“We receive many questions about when is the best time to buy, which means people have demand and their financial potential is high. The fourth quarter is always the most active in the real estate market. Enterprises mostly manage to estimate their profits and employees take stock of their incomes and rewards. Project owners who offer reasonable prices and good proper designs will absolutely attract buyers. Regardless of consumers’ behaviour, project owners who are selling at this moment have surely had long term options. When suppliers try so many ways to approach consumers, there will be various options to fulfil all types of demand,” Mr Tuan added.
Reported by Luong Tuan | VCCI News

Serviced apartments still hold potential: expert

6 Dec
VNRE – Vietnam’s serviced apartment segment still holds great potential, even when compared to other housing segments, a recent conference on the subject heard.

In the face of the entire real estate industry’s recession due to macroeconomic difficulties, the segment is facing many challenges, said Marc Townsend, managing director of CBRE Vietnam at the “Vietnam Serviced Apartment Investment Conference 2011”.
“They include falling rents and fewer tenants due to the worsening economic situation, as well as stiff competition from individuals buying apartments for sublease,” he said.
However, the serviced apartment segment has a great chance to grow as the inflow of foreign direct investment (FDI) returns as the local economy recovers, the rapid urbanization process in major cities continues, the growth of Vietnamese manufacturing industries holds steady, and the number of international travelers to Vietnam continues to rise.
There are many other factors that could boost the future development of the segment, including the growth of investors’ appetite for operating assets and the lack of existing products.
There are only 3,595 existing serviced apartment units in Ho Chi Minh City, while the number of work permits for foreigners in the city last year jumped to 6,700, excluding ‘grey’ expats, or those working without permits, Townsend added.
According to CBRE, HCMC still leads the country in the number of serviced apartments available with 3,595 units, followed by Hanoi with 2,300 units, and Da Nang with only 146 units.
CBRE believes that the number of serviced apartments on offer is too low to meet the needs of the foreigners and the nearly 81,000 overseas Vietnamese who work in Vietnam.
In the future, the number of foreigners working in Vietnam will rise, leading to increased demand for serviced apartments, but the existing supply is too limited for this expected upturn in demand, as are the plans to develop this potential market.
Ben Thanh Luxury project, one of only two projects in the center of HCMC where apartment buyers will be granted permanent ownership, will be invested and transferred into high-end hotels for lease, a form of investment in serviced apartments, said Nguyen Cao Tri, Chairman of Ben Thanh Real Estate Investment Joint Stock Co.
The capital recovery period is six years if investment is shifted into serviced apartments, a temporary solution while the real estate market is frozen, he added.
Source: TTO

Vietnam’s Property Price To Decline Further

28 Nov
VNRE  Property prices in Vietnam market have declined by 20-30% sharply so far, hence a lot of firms had to sell off projects to repay bank debts, but the prices of high-class apartments will be much lower.

The prediction was said by Marc Townsend—Managing Director of CB Richard Ellis (Vietnam) global research and consulting firm at the international conference themed “Credit Crunch: Where from Here for the Vietnam Real Estate Market?” on November 23 in HCM City hosted by DFDL Mekong law firm in corporation with CBRE and Standard Chartered Bank.

Regarding the office-for-lease segment, Marc Townsend spoke, the thing what renters are paying attention is competitive prices and it is right time for companies to move headquarters and offices from outskirts such as Dist 7, Tan Binh Dist to centre districts in HCM City.

In order to maintain and attract, property investors need to improve current buildings and increase utilities of buildings such as basements, decoration, energy saving, and seek opportunities to re-negotiate rentals.

CRBE Vietnam forecasted the Vietnam real estate market will remain gloomy 2012 in all segments. Only the segment of properties for education, international kindergartens, healthcare, and beauty, eating and drinking will continue generating good performance.

Sharing the point of view, Michael Kokalari—Chief of Kimeng Securities Co’s information research department, through talks with foreign investors in Vietnam, said that the investors from US, Japan, Europe paid a great attention to consumer beheaviors of young mid-class group in Asia generally and Vietnam particularly.

In the recent past, these foreign investors bought back stocks of Vietnam’s consumer industry companies namely Masan, Huong Thuy based on the development potential of this field, he noted.

Michael Kokalari assessed, despite the property prices declined 20-30% as announced lately by PetroLand Co, Vietnam real estate market has not gone to its equibrilium point. Many firms who were facing difficulties in liquidity, bank debts are not desperate because it is normal as debts increased in the crisis period.

David Tran, Vice Chair cum Director of the Asian Real Estate Association of America (AREAA) in US stated at the conference that the Vietnam real estate market is losing liquidity, so investors are seeking money sources outside the banking system, and overseas remittance is the way-out for property projects. If Vietnam continues improving legislative environment, removing barriers in law on contracts, taxation policies for foreigners, the realty market will receive a quite high volume of inward remittances from 4.5 million Vietnamese overseas.

Meanwhile, according to Ta Chau—Director of DFDL Mekong tax and law consulting firm, she was so excited to changes in Vietnam’s laws in 2012.

Ministry of Finance proposed to open Real Estate Investment Trust funds (REITs) which are expected to create a strong movement in the market in following years. Through REITs, creating an easy capital divestment regime whereby investors are able to withdraw capital if necessary, she remarked.

Experts also recommended 16 changes in property-related laws and regulations, including Law on Land, Law on Investment, and Law on Enterprises. These changes may create negative moves in Vietnam in next 5 years.

The Vietnam real estate market in 2012 is determined by the government decisions, she confirmed.

Source: StoxPlus