Market face dark 2011

Many property developers will be happy to see the back of 2011

The nation’s real estate market could freeze up in the second half of  2011 due to macroeconomic turbulence.

In a recent seminar “Financial policies for real estate market”, Central Institute for Economic Management expert Tran Kim Chung expected there would be three main scenarios for the real estate market this year.

In the first scenario, he assumed the property market would further slow down due to capital shortages, high lending rates and the government’s tightened monetary policy.

Chung said the second scenario was the market would completely freeze, with property firms likely to  go bankrupt if credit growth was tightened and inflation continues to soar.

The last scenario was the market would recover by the end of this year if the monetary policy was loosened.

Cen Group deputy general Pham Thanh Hung did not agreed with Chung’s comments. Hung said: “It’s difficult to see the government loosening realty credit. Even if bankers opened doors to offer investors realty loans, no one wants to borrow at high interest rates and low benefits.”

Hung said developers of projects which were sold out before 2010 and financial strong foreign developers would survive.

“High-end projects have not attracted customers, while mid and low-end projects still received the attention of home-buyers. However, developers of the mid-and low-end projects hesitated to invest into the segments because of low benefits, and being easy to be fallen into fierce competition at launches, said Hung.

Dang Hung Vo, former deputy minister of Natural Resources and Environment, said: “Loosening realty credit cannot save the market. If developers borrow money from bankers, they may not pour the money into developing their projects, but use it to roll over their debts.”

Credit has dried-up for developers, residential sales have slowed, payment terms have become a sticking point, tenants take longer to choose with more choices available and there are fewer transactions in the residential, office, retail, investment and industrial sectors, according to “CBRE Mid-year review 2011” report.

The CBRE report said some completed projects could not find tenants or customers, developers were playing chicken with the banks, the government, with buyers and each other.

According to a Colliers International (Hanoi) report, developers have now started to, really by necessity, pay more attention to the interests of the buyers. More promotional policies began to be used and unfavourable terms for buyers are being reviewed.

The consulting company’s Hanoi office predicted that the residential market in the capital city was still waiting for positive points from the financial market and credit policies of banks, however this would not occur in the latter part of 2011 and will be unlikely in 2012.