Is market set to close up shop?

The city’s property market is ready for a dose of reality

This follows a series of tightening financial moves and the proposed introduction of progressive taxes.
“A large number of property traders in districts 2, 7, 9, Nha Be and Binh Thanh have recently sold out to pay off their bank loans, due to the fear of more direct and tougher government regulations. Nearly 90 per cent of speculators have loans from private banks,” said Nguyen Xuan Loc, head of Vinaland Company’s transaction centre in District 2.

According to a source from the State Bank in Ho Chi Minh City, the credit for property in 57 commercial banks reached 38 per cent of the banks’ total credit in 2007, while the advisable rate was just 10 per cent.
“Most investors are not buying any more properties and are cautiously observing the market movements, after the government proposed progressive taxes that will be levied on property owners, making prices slide down slightly,” he said.

The property prices in official transaction centres have fallen by about VND500,000 ($31.25) per square metre in Ho Chi Minh City and by about VND2 million ($125) in neighbouring provinces such as Binh Duong, Dong Nai and Vung Tau.

“The recent increase in the cost of financing across new mortgages, refinancing facilities and holding costs and inflation are starting to impact on buyer behaviour patterns, particularly at the lower end of the market, which is the main cause of further downslides as the Vietnam’s realty market is sensitive and vulnerable,” said CBRE associate director Matthew Koziora.

“The government does not want this market to stop completely, as it is the sector that is creating new wealth among Vietnamese population. The realty sector will not freeze in the near future as there is a structural imbalance in the marketplace, whereby there is a very low supply base and proven high levels of demand,” Koziora said.

He said the decline in property prices would only affect the outlying areas that attract the low to medium-end market, and the high-end market would be unscathed

Giant local investors such as FPT, Viglacera, Lilama and Bitexco, as well as certain foreign investors, had not been intimidated or deterred and were pushing ahead full-throttle with their development plans, so high-end properties will continue to soar, Koziora said.