Last updated: Thursday, May 23, 2013
Property Market: Likely Recovery?Posted: Sunday, June 03, 2012
2012 has seen more positive than negative news, a rally in the stock market, downward inflation and three interest rate cuts in three months. Why is the property market still quiet?
According to the new report released by Knight Frank - the global property consultancy, the past 3 years has knocked the confidence out of the property market, many companies and individuals involved in the real estate market lost considerable sums of money and when people lose confidence they look for alternative safe havens to invest and for most Vietnamese, Gold, Bank Deposits and Equities proved more attractive than property.
However, there is some light at the end of the tunnel, tighter legislation on gold trading, a downward trend on bank deposit rates and profit taking from the stock market has meant that momentum is beginning to shift and the spotlight is once again beginning to shine on real estate.
Knight Frank is seeing many of the more experienced developers, investors and buyers that have sat on the sidelines over the past 12 months now deciding that this is the time to dip their toe back in the real estate water. With further interest rate cuts predicted throughout the course of 2012, confidence is slowly beginning to come back to the market, provided the global economy doesn’t give investors any further nasty shocks for the remainder of the year and inflation remains stable. “We firmly believe the real estate market will start to recover”, Knight Frank reported.
Ultimately, the real estate market needs cheaper money available to buyers and developers. However, investors would encourage a steady decline in interest rates over the next 12-18 months which will bring some certainty and stability back to the market.
Real estate market is still receiving strong interest from foreign investors that see there is a window of opportunity; however, the obstacles and hurdles remain the same. In order for Vietnam not to lose out on this much needed investment to other countries there remains a strong need for much tighter regulation throughout the whole real estate industry with a strong and effective legal framework, with more professionalism and transparency. With further control and tighter legislation there is no question Vietnam will benefit from more and more foreign investment.
So where is the opportunity? Due to a very stagnant property market, development within the country declined dramatically over the past 2/3 years and whilst it may be difficult to envisage at this stage, as soon as the market starts to improve, existing stock in most sectors, especially Office and Residential, will be soaked up pretty quickly, which will lead to increased prices and rentals and a shortage of stock. So within 24-36 months, we will be in a very different position.
From another property consultancy, Marc Townsend, Director General of CBRE Vietnam still forecast that in 2012, businesses and individuals can gain profits from opportunities in the Vietnam real estate market.
In the CBRE Vietnam’ report published in April, while the Hanoi apartment market saw secondary price increase in the past three year, that in HCMC has been rather stable. It is estimated by CBRE that housing price in Hanoi will stay still, similarly to the trend in HCMC in recent years. This is reinforced by evidence showing that the number of remaining condo apartments in Hanoi is about 16,000 while the number of those expected to be offered in 2012 is up to 22,000 ones.
Mr Nguyen Trong Ninh, Deputy Director of Housing and Real Estate Market Management Department (Ministry of Construction) said: In previous years, the property market developed strongly, but the development is disassociated with specific strategies and plans, leading to serious imbalance in supply and demand. Besides, the credit system was not strong enough to fund medium and long-term development objectives.
“From 2012 to 2015, there will be a market adjustment wave. There will be both some insiders leaving and some new participants in the market,” said Mr Tran Kim Chung, General Director of C.T Group. The market will remain stable or decline a bit during 2012, then go up from the end of the year and reach the peak at approximately the end of 2014 or the beginning of 2015. However, from now to that time, real estate should overcome its inertia in the transition from monetization to financialization.