Frozen property sector shows signs of thawing

The often volatile Ho Chi Minh City property market is showing signs of better health

Richard Leech, executive director of CB Richard Ellis Vietnam, said Vietnamese property was attractive as more people were back to buy. “I think there will be a turnaround for the market in the next quarter of 2008 and you will see things are picking up in 2009,” Leech said.

Leech saw some recent market improvements with buyers with more cash to spend in a less speculation market.
Analysts said in recent weeks they have seen clear signs that buyers were returning to some segments of the once dynamic Ho Chi Minh City property market.

“Of course this amounts to a fairly small increase in activity from what has been a frozen market for several months,” said Nguyen Thi Yen, a Ho Chi Minh City-based analyst. Yen added the Phu My Building project in District 7 was in late August advertising apartments at VND19-21 million ($1,140-$1,260) per square meter, a sharp rise on July’s price of VND15-16 million ($902-$962).

The price ranges for some key prestige developments such as The Manor, Phu My Hung, Central Gardens and Cantavil have started to move a little bit higher. In the mid priced segment range, Phu Hoang Anh and Richland Hill have firmed up while the price of the Sunview had sagged slightly.

“In line with the equity market there are some early signs that the worst is over for now and we may be seeing a consolidation of prices around or above current levels. Nonetheless if a bottom has indeed been reached we can look forward to a gradual improvement in the property market over the next few quarters,” said Yen.

Yen, however, said property prices in Ho Chi Minh City were notoriously volatile and one good month did not herald the beginning of a new bull real estate market. Also, there have not been any signs of banks wishing to sell off real estate collateral for bad loans. “So there is a potential over-hang that buyers ought to be alert to,” she said.

Leech, meanwhile, said home and apartment prices in Vietnam had stabilised but land prices might go down further.
“Turning land into property is more expensive now than last year because of higher construction costs,” he said.
Foreign investors are, meanwhile, registering to pour more money in the real estate sector so far this year.

“It is more understandable because it is really that international property developers have long view on Vietnam market, realising that cities in the country are under developed and they need investment for infrastructure building,” Leech said.

Market observers are concerned that the large hot money inflows could cause bubble market conditions.
“I do not think so, as not all FDI registered projects are implemented. The market, however, will decide which projects and how many projects are to be built,” Leech said, adding that the property market was now well regulated with new regulations designed to make the business more transparent.