Luxury sector sees recovery signs

Michael Piro, director of sales and marketing at Indochina Land

Given the current slow-down in residential transactions as a result of the government’s tightening monetary policy, is the luxury residential market being hardest hit?

The current challenges presented by Vietnam’s macroeconomic climate have had a negative impact on all sub-segments and grades of Vietnam’s residential property market.As the summer is winding down, we are witnessing an anticipated slowdown in sales amongst our resort portfolio as this sub-segment is characterised by low seasonal demand during the central coast’s rainy season.
Given the current situation, we are pleasantly surprised with the resilient performance of our high-end property portfolio which has continued to experience healthy absorption particularly at Indochina Plaza Hanoi.

How has Indochina Plaza Hanoi sold in recent months?

We are seeing a notable increase in demand at Indochina Plaza Hanoi where we have transacted over $3.6 million (14 units) in over the past 18 days.  This has been encouraging for us and we believe this is strongly attributed to the State Bank’s directive to reinforce the implementation of the Circular No.02/TT-NHNN capping deposit rates at 14 per cent, money is starting to flow out of the banking system and back into real estate.

Additionally, we have historically transacted our highest sales volumes during the third and fourth quarters since 2009 and given our recent success, we believe this trend will persist through 2012. Overall, this uptick in transactions indicate preliminary signals improving market conditions as the market cycles from a state of stagnation to early recovery.

How different are the customers of Indochina Plaza Hanoi now compared to the time when the real estate market was hot more than two years ago?

There has been an enormous shift in the profiles, demands and behaviour of today’s buyer in compared with two years ago and developers and agencies alike need to adapt by fine-tuning their customer services strategies.

Two years ago a sales agent was more of an order taker as buyers queued up to purchase apartments while in today’s marketplace the art of selling requires technique and professionalism as we have entered a buyer’s market. Two years ago, many buyers would spend two to three hours studying the project before making a purchase decision, while in today’s market the sales process often takes two to three weeks of very detailed meetings with a prospective purchaser before a purchase is made. They are looking at the design of units more carefully and requesting customisation features, they are concerned with the commitment from the developer to handover their home on schedule and they are prudent in their analysis of how their home will be managed in the future.  

We actually find this new wave of buyers to be quite refreshing to work with as our products are designed and built to meet the standards of a prudent and discerning property buyer. This market truly allows Indochina Land to differentiate our homes from our competitors as buyers are taking the time to get acquainted with our development, our approach and of course our people.  
 
Do you think there are still opportunities to develop new high-end condominium projects in Hanoi or Ho Chi Minh City? Will Indochina Land have any plans to further tap this market?

Absolutely, Vietnam’s high-end residential market is still in its infancy which presents a tremendous opportunity for growth.  We believe the creation of wealth in Vietnam will continue on a positive trajectory and the demands for high-quality condominiums will move in tandem. Additionally, with buyer preferences maturing as homeowners become more prudent and discerning we believe our position in the market will grow as we continue to offer excellent service and timeless homes.  With this being said, we at Indochina Land will continue to offer high-end products while we will also be introducing some more affordable products targeted towards the middle-range segment.  Whether we are building high-end or mid-range products, our commitment to quality and value for money will not change.
 
Other developers are struggling to find cash to proceed with construction as banks refuse to lend. Has Indochina Plaza Hanoi faced these problems and how have you arranged financing for the project?
 
Before we carry out a project, we conduct very detailed financial feasibility studies with anticipation of changing market conditions - for better and worse.  From these studies, we are able to plan our financing to ensure the smooth delivery of the project. A point of differentiation with Indochina Land, is our track record of partnering with the nation’s most reputable banks to finance the construction of luxury developments across the country. As we have continued to complete projects while making our financing payments on time, we have developed a sterling reputation and credit rating within the banking sector as a secure and trustworthy developer.

At Indochina Plaza Hanoi specifically, we have secured debt financing which is complimented by our equity and pre-sales.  As one of Vietnam’s largest funds, we are well capitalised and are not facing any problems at this time as it relates to financing Indochina Plaza Hanoi.  We look forward to completing the project with the first phase of residential units being ready for handover in December, 2011.