Back on track real estate market in Vietnam | Goldenkeyproperty.vn

There have been some cautious predictions about Vietnam’s economic growth with an anticipated GDP growth rate from 4.5 per cent to 4.7 per cent in 2009 (ADB and HSBC). On the other hand, there are many positive expressions describing the growth of the real estate market as “the market recovery”, "many points of light waves", “market fever again", etc. The stock index of real estate companies, such as Hoang Anh Gia Lai, Tu Liem Urban Development and Investment Co., Thu Duc Housing Co. increased from 200 per cent to 400 per cent compared to less than 200 per cent growth of the VNlndex, within the same period from January to September 25, 2009.

Sign of recovery

In 2009, apartments for rent and sale markets in Hanoi and Ho Chi Minh City had contrasting results. At the beginning of this year, some projects in No Chi Minh City had to reduce their prices by 40 per cent to attract buyers, while the prices in Hanoi were only some 5 per cent down This is partly to do with an oversupply in certain parts of Ho Chi Minh City and an overall undersupply in Hanoi respectively. Recently however, the market price has increased rapidly in both Hanoi and No Chi Minh City with some projects increasing as much as 20 per cent in the past four months
Quality seems to have finally become important. Gone are the days of 2006 and 2007 where anyone with an artistic drawing and some floor plans seemed to be able to sell residential units Now, developers must research not only the competition, but also their target customer and really understand what the buyer wants Buyers are now much more careful and much more knowledgeable about the market and are demanding to see the details They want to know who the developer is, see their track record and feel comfortable with the ability of the developer to complete. Developers also need properly organised and thoughtful marketing strategies and a team of qualified sales people to really sell, not simply wait for the phone to ring.
Interestingly, the strongest performing real estate sector has been the villa and resort property sector, which has demonstrated interest far above historic levels. Two projects in the Danang area, on the central coast, have performed particularly well Notably the Ocean Villas, developed by VinaCapital, launched in July 2009 and the Hyatt Regency Danang Residences, developed by Indochina Land. which was launched in June 2009 Both projects have sold between 75 to 80 per cent of available stock.

What is driving the recovery

The property market appears to be in the process of recovering in response to a macro economic recovery in Vietnam. Theoretically, any sector with fickle demand characteristics such as real estate will be highly sensitive to an economic crisis. Sale of apartments came to a standstill for most of 2008, yet some developers continued with construction, leading to an oversupply in some areas. Now, home buyers and investors are seeing value in reduced pricing and are also looking at property as a solid investment class given the huge increases in both the stock market and gold prices. They are also buying as a hedge against the low returns on bank deposits and as a hedge against possible inflation. It is difficult to provide the quantitative estimation of this demand since at its core one must ask a very important and sensitive question - how much. money do Vietnamese people have? It is a question often asked and rarely answered definitively. The International Monetary Fund estimates that only one third of all Vietnamese dong is in the banking system while two thirds are ’on the street’. In addition, there afe estimates that there is between $22 billion and $23 billion worth of gold in Vietnam, yet in a survey of 41 banks across Vietnam, only $1.3 billion is in the banking system. It is not hard to extrapolate that there is plenty of money under the mattress at home that can and is being spent. Some of this is going into real estate in Vietnam. Does this mean that the property market has entered a strong, sustainable recovery or is this a short lived surge in the market? that the demand for property is strong both as a form of speculative investment and for end-users. There is, according to government and private sector estimates, a lack of housing in Vietnam. An increasing population both through birth and urbanisation in the case of Vietnam’s cities, and as demonstrated above, the money available to drive the market forward.
Remarkably, or perhaps not so remarkably given the above, the buyers of the luxury resort projects across Vietnam are almost exclusively Vietnamese despite recent changes to Vietnam law allowing some foreigners to purchase in Vietnam.

Looking ahead

Apartments for rent and sale market will see, in general, smaller units with quality and value for money the key drivers. Landed property (villas) will remain the choice of the wealthy.
Cenainly, the concept that any residential product could be sold in the market is no longer valid in Vietnam.
Customers are now more demanding while the market is diversified. Consequently, good designs, development control and sales agency are critical. Predicts that FDI in real estate will still account for an increasing proportion of FDI but local developers will lead the way. However, both foreign and Vietnamese investors will be more cautious in choosing projects.The market is there. Vietnam is ready.