Viet Kieu begin to invest in VN property market

HA NOI — A large number of Viet Kieu (overseas Vietnamese) have started to invest in the Vietnamese real estate market.

Investments had become more diversified and stronger than ever, said Megagroup's Director Nguyen Xuan Chau.

Chau added that the trend had started around 10 years ago and really picked up over the past two years.

In 2010, he said, a series of resorts and ecological tourism projects were announced with a growing number of North American management and consultancy firms co-ordinating the projects.

To capitalise on this, Minh Viet Investment Joint Stock Company recently bought into the franchise of a famous foreign company in order to use its trademark to invest in Viet Nam's real estate market.

According to the com-pany's director Chi Edward, his company will use the trademark to do business in training and brokerage as well as managing and developing the real estate market in Viet Nam.

The company had previously invested in projects in Ha Noi, HCM City and the northern province of Quang Ninh.

As further proof, at the end of 2009, the director of Binh Thien An Joint Stock Company, Viet kieu Trinh Thanh Huy, decided to return from Russia and announced that his company was looking to pour hundreds of millions of dollars into the real estate market in HCM City.

Binh Thien An is currently involved with the Thao Dien Metropolice project in District 2 of HCM City.

In the second and third quarters of this year, many other tourism developments were announced by overseas Vietnamese investors from eastern Europe.

The Vietnamese real estate market was still young. It had a huge potential to attract investment from overseas Vietnamese, Chau said.

Referring to a recent survey, experts said the new trend would create competitiveness in the market which would help develop it further.

The survey was carried out at an international real estate exhibition with the participation of 46 countries.

The results showed that investment interest in the Vietnamese real estate market had grown by 20-30 per cent since 2008.

Another survey conducted by a British company also found that in the next two years, Viet Nam would become one of the top three markets of interest in the world. — VNS

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Vietnam real estate market offers more affordable options

The local residential market is undergoing a positive development: affordable housing is on the rise, according to the consulting firm CB Richard Ellis.

In a report released on Tuesday, the firm found that a wave of low-cost housing projects broke ground in Hanoi during the third quarter revealing a movement toward more affordable residential options.

The report authors also said that a new regulation (which caps the proportion of units sold via capital contribution contracts at 20 percent) is expected to help the market by enhancing transparency, placing pressure on developers with low financial capabilities, reducing the threat of price bubbles, and limiting speculative forces.

In the third quarter, the market was quieter with fewer new projects launched. Only 1,950 units were added to the market compared to last quarter’s 4,600 units, the report indicated.

The capital city expects to see the launch of 3,000 units in the fourth quarter, bringing total new supply in 2010 to nearly 16,000 units, it said. Following the opening and improvement of major infrastructure routes, western and southern districts are attracting new residents with easier access to core urban districts.

‘Pent-up demand’

Meanwhile, the fastest-growing segment of the real estate market in Ho Chi Minh City is also affordable homes.

“Twelve affordable projects were launched in the third quarter with asking prices ranging between US$563 and $923 per square meter,” CBRE said in a separate report, released on Wednesday.

“Despite the up-tick in inflation seen in the third quarter, the base of Vietnam’s economy is strong,” said Marc Townsend, managing director of CBRE Vietnam.

Commenting on the trend toward the affordable segment of the market, Rudolf Hever, associate director of Research and Consulting, said it’s clear that “as the Vietnamese economy continues to grow, and incomes increase, there is pent-up demand from people who were previously priced out of the market.”

He said the government has made a lot of effort to support the residential property market, including measures to increase transparency and increase the availability of loans.

“All these efforts work together, encouraging prospective home buyers to look at new and existing developments as a realistic option,” said Hever. “As these affordable projects achieve critical mass, the availability of facilities and amenities in these areas will increase too.”

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Vietnam real estate market offers more affordable options

The local residential market is undergoing a positive development: affordable housing is on the rise, according to the consulting firm CB Richard Ellis.

In a report released on Tuesday, the firm found that a wave of low-cost housing projects broke ground in Hanoi during the third quarter revealing a movement toward more affordable residential options.

The report authors also said that a new regulation (which caps the proportion of units sold via capital contribution contracts at 20 percent) is expected to help the market by enhancing transparency, placing pressure on developers with low financial capabilities, reducing the threat of price bubbles, and limiting speculative forces.

In the third quarter, the market was quieter with fewer new projects launched. Only 1,950 units were added to the market compared to last quarter’s 4,600 units, the report indicated.

The capital city expects to see the launch of 3,000 units in the fourth quarter, bringing total new supply in 2010 to nearly 16,000 units, it said. Following the opening and improvement of major infrastructure routes, western and southern districts are attracting new residents with easier access to core urban districts.

‘Pent-up demand’

Meanwhile, the fastest-growing segment of the real estate market in Ho Chi Minh City is also affordable homes.

“Twelve affordable projects were launched in the third quarter with asking prices ranging between US$563 and $923 per square meter,” CBRE said in a separate report, released on Wednesday.

“Despite the up-tick in inflation seen in the third quarter, the base of Vietnam’s economy is strong,” said Marc Townsend, managing director of CBRE Vietnam.

Commenting on the trend toward the affordable segment of the market, Rudolf Hever, associate director of Research and Consulting, said it’s clear that “as the Vietnamese economy continues to grow, and incomes increase, there is pent-up demand from people who were previously priced out of the market.”

He said the government has made a lot of effort to support the residential property market, including measures to increase transparency and increase the availability of loans.

“All these efforts work together, encouraging prospective home buyers to look at new and existing developments as a realistic option,” said Hever. “As these affordable projects achieve critical mass, the availability of facilities and amenities in these areas will increase too.”

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Herd mentality adds to volatility of fluctuating real estate market

Construction of an apartment building in Ha Noi's Ha Dong District. Many incomplete apartments are bought by people who hope to re-sell their purchases at a profit. — VNA/ VNS Photo Tuan Anh

HA NOI — Vietnamese citizen Nguyen Hoai Nam bought a plot of land in Ba Vi District's Tan Linh Commune after hearing that the national administrative centre in Ba Dinh District would be moved to Ba Vi.

"I followed my friends and bought the property in the hopes that its price would increase much higher than what I had bought at VND800 million," Nam recalls.

Nam is not alone in his thinking.

It is not uncommon to see a number of investors pouring their money into buying land, following the advice of their relatives and friends.

Vice chairman of the Viet Nam Report Company Phung Hoang Co put forth a survey that found that nearly 62 per cent of the 500 questioned consumers in Ha Noi had bought real estate simply to resell it at a higher price.

"In many cases, herd mentality is a decisive factor to the fluctuating real estate market," said vice general secretary of the Association of Cities of Viet Nam Vu Thi Vinh.

She attributed the trend to insufficient information and a lack of understanding leading to many buyers who are then unable to analyse real changes in the market. Instead, they rely on the advice of acquaintances to buy land.

The Viet Nam Report survey also found that 44 per cent of buyers had invested their own money in buying property; 35 per cent borrowed from their friends and relatives and about 20 per cent used bank loans to buy property.

The desire to buy land has been boisterous in Ha Noi in the past months with projects spanning across the new urban areas of the capital's western region.

Analysts have attributed the trend to the expansion of the Lang-Hoa Lac Highway (now Thang Long Boulevard) and to an exhibition that focused on the capital's vision for development over the coming decades. The exhibition revealed that five satellite cities and the proposed Thang Long axis would link the Ba Vi region to the west of Ha Noi.

Former Vice Minister of Natural Resources and Environment Dang Hung Vo said the recent land fever in Ba Vi in particular and in the western region in general exposed the reality that both managers and investors were not professional.

"How can a project like Ba Vi, which is still waiting for planning approval, create an outbreak of land fever where several hundreds of investors rushed to buy land there?" said Vo.

He said land fever in Ba Vi did not follow market rules. Traders did not study information carefully but simply rushed into decisions because of the herd mentality.

Le Minh Hoang of the Ha Noi Real Estate Joint-Stock Company said most of the land fever actually deflated quickly because investors were short of information. And unfortunately, one negative consequence was wildly fluctuating real estate prices, he said.

Hoang added that the real estate market will be impossible to stablise if investors remain vague about information.

The problem, however, will hopefully be settled after the recent issuance of Government Decree 71, which imposes stricter rules on real estate investment.

Vo said the decree will help solve various issues, including the ways in which project developers raise capital from buyers and the regulations for the transfer of land-use rights, among others.

The decree is also expected to raise the market's transparency.

Vo said he hoped the decree would reject unprofessionalism and speculative investors who often spread misleading information to seek a profit. — VNS

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Strict lending policies hamper contractors

Housing developers are struggling to cope with banks' tightened lending policies.

The new regulations in tandem with construction materials' rising
prices is making it difficult for developers to survive as the real
estate market continues to chill for the second straight quarter.

A leader of the Vietnam Construction and Export-Import Corporation
(Vinaconex) said an increase in construction materials' prices, along
with banks' restricted lending policies, had made construction companies
broke, forcing them to liquidate.

Construction materials'
prices increased by 30 to 40 percent during the past few months while a
new chill in the property market caused bidders to abandon their
projects after their proposals concerning the adjustment of construction
materials' prices were refused by house owners.

The
procedures for State funded construction projects, concerning price
adjustments, takes a long time, making the supply of housing projects
lag behind schedule which in turn adversely impacts the real estate
market.

The prices of construction materials including steel, cement and housing equipment continue to soar.

Construction materials account for 40 to 70 percent of the total
estimated capital for building projects, according to the Institute
of Construction Economics .

Property markets primarily
depend on monetary and credit policies, according to a Ministry of
Construction report that was submitted to the Government Office.

Banks began increasing lending interest rates and applying greater
restrictions on mortgage loans starting in July, following a warning
from the State Bank of Vietnam (SBV) that urged financial institutions
to be prudent with issuing loans for real estate projects.

The warning was issued in response to findings that real estate loans
accounted for more than 5 percent of the bad debts that had incurred at
several commercial banks in the country.

The SBV reduced
the short-term deposit proportion reserved for long-term loans from 40
percent to 30 percent and specified real estate loans as high risk.

Vinaconex deputy director Nguyen Dinh Thiet said commercial banks only
lent loans for up to 10 years, and total outstanding real estate loans
were restrained to 10 percent.

Commercial loans provide
the primary impetus for the property market, reports the Collier
International Company. Buyers are hesitating to borrow money from banks
to purchase homes, while banks increased their interest rates that range
from 17.5 to 18 percent per year.

Investors have begun to
secure capital from other sources including mobilising cash from
secondary investors and issuing bonds. Secondary investors are not so
interested in investing in housing projects, as the chill in the real
estate market continues./.

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Strict lending policies hamper contractors

Housing developers are struggling to cope with banks' tightened lending policies.

The new regulations in tandem with construction materials' rising prices is making it difficult for developers to survive as the real estate market continues to chill for the second straight quarter.

A leader of the Viet Nam Construction and Export-Import Corporation (Vinaconex) said an increase in construction materials' prices, along with banks' restricted lending policies, had made construction companies broke, forcing them to liquidate.

Construction materials' prices increased by 30 to 40 per cent during the past few months while a new chill in the property market caused bidders to abandon their projects after their proposals concerning the adjustment of construction materials' prices were refused by houseowners.

The procedures for State funded construction projects, concerning price adjustments, takes a long time, making the supply of housing projects lag behind schedule which in turn adversely impacts the real estate market.

The prices of construction materials including steel, cement and housing equipment continue to soar.

Construction materials account for 40 to 70 per cent of the total estimated capital for building projects, according to the Institute of Construction Economics.

Property markets primarily depend on monetary and credit policies, according to a Ministry of Construction report that was submitted to the Government Office.

Banks began increasing lending interest rates and applying greater restrictions on mortgage loans starting in July, following a warning from the State Bank of Viet Nam (SBV) that urged financial institutions to be prudent with issuing loans for real estate projects.

The warning was issued in response to findings that real estate loans accounted for more than 5 per cent of the bad debts that had incurred at several commercial banks in the country.

The SBV reduced the short-term deposit proportion reserved for long-term loans from 40 per cent to 30 per cent and specified real estate loans as high risk.

Vinaconex deputy director Nguyen Dinh Thiet said commercial banks only lent loans for up to 10 years, and total outstanding real estate loans were restrained to 10 per cent.

Commercial loans provide the primary impetus for the property market, reports the Collier International Company. Buyers are hesitating to borrow money from banks to purchase homes, while banks increased their interest rates that range from 17.5 to 18 per cent per year.

Investors have begun to secure capital from other sources including mobilising cash from secondary investors and issuing bonds. Secondary investors are not so interested in investing in housing projects, as the chill in the real estate market continues.

 

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Vietnam’s real estate market stagnates

A deluge of development has left Vietnam swimming in apartments no one can afford

Workers at a construction site in downtown Ho Chi Minh City. Supply will increase on the local real estate and experts say this can put more pressure on prices.

The real estate market, especially the high-end aparment segment, has hit a rough spot recently as prices remain high in the face of abundant supply.

The actual demand for luxury property is very low, at the moment. Many developers have had to cut their prices and begin offering lots of perks to attract buyers. Despite these efforts, sales have sagged, according to Nguyen Manh Ha, director of the Construction Ministry’s Housing and Real Estate Market Management Department.

“This month only two people bought apartments,” said Nguyen Thu Ha, a salesperson from a real estate exchange center in Khuat Duy Tien Street in Hanoi. “Most people come here to check prices only.”

Many real estate exchange centers in the area are seeing the same situation, she said. Despite the slow trade, property prices remain beyond the financial grasp of many customers she explained.

In Ho Chi Minh City, only 14 percent of the luxury apartment supply was sold in the first eight months of this year. Meanwhile agents sold off 17 percent of midrange and 20 percent of low-end apartments, according to a recent survey conducted by the market research firm Cushman & Wakefield Vietnam.

The primary apartment market in Hanoi was generally not very vibrant in the second quarter. Only 670 units were sold, accounting for 48 percent of the primary supply, said Savills Vietnam, a UK-based research firm.

Hugo Slade, deputy director of Cushman & Wakefield Vietnam, attributed the stagnation to high real estate prices and high interest rates. Complicated borrowing procedures remain a major obstacle for those who cannot afford the inflated prices.

The price of luxury apartments stands at US$2,350-2,870 per square meter, while mid-range and low-end flats sell for $1,460- 1,860; and $780-810, respectively, according to the survey.

Nguyen Van Minh, general secretary of the Vietnam Property Association said the real estate market in Hanoi and some neighboring areas was very hot, when the National Assembly discussed the Hanoi zoning plan some months ago. Because the plan has still not been approved, the market has reverted to its previous state.

A supply surplus has only exacerbated the situation. According to the Ministry of Construction, 2,500 apartment projects are currently underway nationwide, including 800 in Hanoi, and 1,400 in Ho Chi Minh City.

A recent report from Savills Vietnam said there were 11,200 apartments available for sale in the southern city’s primary market in the second quarter, an increase of 24 percent compared to the first quarter. The company said about 28,500 apartments that are currently in the works will be completed between 2010 to 2012. An estimated 5,800 apartments will become available in the second half of 2010.

Minh from the property association, said the government has facilitated the construction of low-income apartments, and many projects have been implemented. Thus, many apartments will become available for sale by the end of this year.

The real estate consulting firm CB Richard Ellis, sales of mid-range and affordable development will continue to flourish in the coming months.

According to the Ho Chi Minh City Real Estate Association, mid-range housing will be the key real estate product both this year and the next. Housing products priced between VND12- 15 million per square meter will grow the most because both homebuyers and investors can afford them.

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Tightened credit chills real estate sales

Work underway on a low-cost housing project in the northern province of Vinh Phuc. Commercial banks are tightening their real estate lending policies, sending a new chill over the property market. — VNA/VNS Photo Tuan Anh

HA NOI — Commercial banks are tightening their real estate lending policies, sending a new chill over the property market.

Since July, banks have hiked lending interest rates and applied greater restrictions on mortgage loans, following a warning from the State Bank of Viet Nam urging greater caution on loans for real estate projects.

The warning was a response to the fact that real estate loans had risen to account for over 5 per cent of the bad debts of several commercial banks.

The real estate market contained high risks since many investors had leveraged existing projects as collateral to finance new projects, said Asia Commercial Bank credit council chairman Pham Trung Cang.

Speculators were also financing the acquisition of homes and apartments in order to obtain additional capital for investment, allowing one housing project or unit to be used as collateral for a loan up to three times, Cang said.

Driven by this speculative fever, the prices of homes and apartments have increased substantially, and unequally among cities and provinces. For instance, in the last quarter of the year, the cost of a plot of land in the western part of Ha Noi rose by 30 per cent between December and July, while prices in HCM City remained fairly constant.

The risk to banks has become significant. In recent years, loans to build, purchase or improve homes have accounted for 35-50 per cent of outstanding commercial bank loans made to individual borrowers.

As of July 31, total outstanding mortgage loans totalled VND210.7 trillion (US$10.8 billion), an increase of about 14.4 per cent from December 31 of last year, the ministry said. But loans for new housing projects, meanwhile, actually fell by 2.35 per cent during the period.

To cool down real estate lending, banks have recently hiked real estate interest rates from a low of 15 per cent to a high of 20 per cent, according to the Ministry of Construction.

But, in a report submitted to the Government Office last week, the ministry complained that tighter credit posed major obstacle to further real estate development and was adding to the instability of the real estate market.

In early 2009, the report said, the availability of low interest loans under the Government's economic stimulus package caused a short term spike in real estate prices in Ha Noi. But, since the end of the subsidised-interest loan programme, the real estate market has remained quiet, and in the third quarter of this year, threatened to become frozen due to tighter credit policies.

The report urged greater flexibility in regulating the real estate market.

About 2,500 housing projects are currently under construction, according the ministry figures, including 800 projects in Ha Noi, 1,400 in HCM City, 260 in Hai Phong, and 120 in Da Nang. — VNS

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