Market remains challenging

Market remains challenging

Vietnam’s struggling real estate market is still facing many challenges ahead.

Cushman & Wakefield Vietnam general manager Chris Brown said 2013 was expected to remain a buyer’s market with falling prices.

Demand for accommodation in Vietnam remained high, with its large, growing population and rising number of mid-income earners offering strong potential, Brown said

However, the market today lacked products that could meet the population’s demands.

Developers were looking for new ways to dispose of property, Brown said, such as subdividing units into smaller ones, giving more incentives and financial support, or putting apartments into rental.

With Resolution 02/NQ-CP of the government and the current surplus supply, the condominium market was expected to continue seeing further price cutting. “Buyers, particularly low and middle income ones will have more opportunities,” Brown said.

More commercial housing projects are expected to transform into social housing ones, with large apartments dividing into smaller ones.

Brown added that Hanoi People’s Committee had put in place a residential development moratorium preventing the approval of more commercial residential development until December 2014 aimed at cooling the market.

Increasing supply remains concerns for policy-makers, developers and buyers.

In the first quarter of 2013, the residential market in Hanoi witnessed several mid-end and low-end projects launching new apartments into the market, with sale prices from VND14 million ($666) per square metre.

Accordingly, grade C primary supply went up considerably to around 5,000 units. Grade B continued occupying the highest market share, with 50 per cent of the total primary supply for all grades. Grade A primary supply stayed the same as the last quarter of 2012.

In the first quarter of 2013, according to Cushman & Wakefield, poor performance still continued.

After the Lunar New Year holidays, developers of many projects started offering incentives for buyers such as gifts or reducing prices directly. However, there was little positive impact on sales volumes.

Average asking prices for grade A condominiums are roughly VND48 million ($2,286) per square metre, grade B around VND30 million ($1,429 per square metre) and circa VND16 million ($762) per square metre for grade C apartments.

It is common for developers to include furniture packages in deals now and this would show an increase of VND5 million ($238) to 10 million ($476) per square metre each.

Meanwhile, in office segment in comparison with the peak rents in 2008, the current average rents for grade A have decreased by 46 and 41 per cent for Ho Chi Minh City and Hanoi, respectively.

Cushman & Wakefield expected a minimum of one million square metres of office forecasted to come online in the next three to four years.

Some tenants, meanwhile, are taking advantage of market by upgrading.

vir