Knight Frank offers its analysis

According to Knight Frank, in the fourth quarter of 2010, Vietnam’s apartment market continued to see the most activity in the affordable segment.

“With banks tightening credit for purchasers, most buyers of apartments have been owner occupiers in the affordable range. The affordable segment has an average price of about $770 per square metre,” said the report from the company.

Due to the strong demand in the low- to medium-end, supply has duly reacted and most of the new supply in this quarter was of the affordable kind. New developments launched in this quarter were mostly situated to the west of Ho Chi Minh City, such as Binh Chanh, Binh Tan, and areas to the south of Ho Chi Minh City, namely District 7 and Nha Be.

This increase in supply in the affordable segment has resulted in strong price competition to sell products. Buyers now have plenty of options in the $40,000 to $50,000 range.

Knight Frank said that during the fourth quarter of 2010, approximately 4,620 units came on to the market. Of this, approximately 23 per cent were in Binh Tan District to the west of Ho Chi Minh City.

Demand in the affordable segment is expected to continue to surpass other sectors. The mid- to high–end market may see some signs for the recovery, if the economy grows stronger and interest rates drop during 2011.

It is forecast that another 100,000 units across all sectors will be supplied to the market in the next three to five years. Projects that are under-construction account for 50 per cent of the above figure.

Meanwhile the villa and townhouse market in Ho Chi Minh City was fairly subdued during the fourth quarter last year. Land plots for villas and townhouses still attracted much more interest from buyers as opposed to the ‘bare-shell’ villa product.

In District 9, the area with the most new villa developments, there were many promotional campaigns by the various developers. However this did not result in a significant amount of transactions in the fourth quarter last year.

Price adjustment strategies and public relation tools were two common methods undertaken by developers in an attempt of push their products to the market. As a result, asking prices decreased slightly by 3 per cent from last quarter.

Elsewhere in Ho Chi Minh City, the market in District 7, especially Phu My Quarter, saw prices increase by 3 per cent in this quarter. The majority of transactions occurred in the range of $1,480 to $1,500 per square metre.

Low liquidity and transaction rates were two major characteristics of the Binh Chanh villa and land plot market in the fourth quarter of 2010. The primary asking prices remained unchanged from the previous quarter from between $692 to $795 per square metre.

Other villas districts across Ho Chi Minh City and the secondary market remained quiet during the quarter. Overall, the land plot market was more active with numerous transactions, especially in District 9, and District 7. However it is noted that the price remained generally unchanged.

There is guarded expectation for any positive movement in the market in 2011, even though the world economic recovery is expected to continue, the company said.

“Developers are finding difficulties with compensation and land-use fee calculations as Decree 69 has increased uncertainty in the calculation of land costs and thus the expected returns from a project,” the company added. “Meanwhile, capital shortages, resulting from the tightening monetary policy of the government to slow down the inflation rate, will have a major bearing on the market in 2011.”

Demand in 2011 is still expected to remain flat until the second half of the year, as a result of high lending rates, speculation restriction policies, and market perception. The second half of the year will depend on the macroeconomic environment.