Property sector applauds rates move

Vietnam’s battle-weary property players are hoping last week’s State Bank announcement of a cut in the key policy rate is an omen of brighter days to come.

The central bank said last week it would bring the interest rate down by 1 per cent to 13 per cent. That along with signs that inflation is set to stabilise in 2012 are being read as positive signs for a real estate market that has been in the doldrums for some time.

Stephen Wyatt, country manager for Knight Frank Vietnam, said that while the property market was still suffering a hangover from the past two years, there were a number of key indicators that will have a positive effect on the market.

“Due to a downturn in the market over the past two years, we believe there is a huge amount of pent up demand for real estate. In addition, the number of international investors contacting Knight Frank has risen dramatically over the past six months.  For these companies Vietnam, alongside China and India are all on the radar,” Wyatt said.

“Investors will have an opportunity to purchase assets in all sectors for prices considerably lower than two years ago and with a large number of developers with deep financial burdens keen to off load their assets we anticipate 2012 will see increased activity,” he added.

The interest rate started to reduce since mid of February 2012, from key banks BIDV, Vietcombank, and Vietinbank. The trend was followed by Agribank, Asia Commercial Bank, Vietnam International Bank, Vietnam Prosperity Commercial Joint Stock Bank and Tienphong Bank.

After the interest reduction, investors considered putting their cash back into real estate products, instead of in gold, in the stock market or even bank savings, said Le Quoc Luong, director of Thang Long Xanh Company.

“This is an opportunity for decisive investors and they can obtain good investment with many incentives,” Luong said. According to Dang Hung Vo, former deputy minister of Natural Resources and Environment, a trimming of bank interest was a good sign for the real estate market.

Le Xuan Nghia, former vice chairman of the National Financial Supervision Committee, said in a recent conference in Ho Chi Minh City that the lower interest rate would help the property market recover.

He added that low cost housing will probably dominate the property market from now until 2020. “The market is expected to recover in 2013, and investors should proceed with their unfinished projects to seize new opportunities,” said Nghia.

Meanwhile, Wyatt said  timing was the key factor for investors. He said it was essential to know if you were buying at the “top” of the cycle.  “As with any property investment anywhere in the world, the key is location and understanding the market,” Wyatt said.

“There is no question that Vietnam still offers huge upsides for any investor over the medium to long term. We are seeing strong demand for many of the investments, land and developments sites that we are currently selling.  With renewed optimism and a return of confidence, 2012 is the time to start looking at investing in Vietnam,” he said.