Real estate picture remains dark

A Rong Viet Insurance Joint Stock company report released last week revealed that in the last eight months of the year,  the real estate market has cooled despite warm economic growth.

“Real estate developers and investors and the market will be not better in the last months of this year. This grey situation even could be extended to mid next year if there are not any changes or adjustment in currency related policies,” the report said.

“Temporary real estate price fluctuations prove the market is unstable,” the report said.

Especially land lot and apartment transactions have suffered due to low liquidity.

In addition, new capital mobilising policies on new residential projects and on land rents and compensation expenses have been obstacles to the enterprises and companies.

According to company’s statistics, credit for setting up new residential areas at the end of July this year was negative 2.35 per cent, compared to 10.2 per cent in 2009. Meanwhile, credit for repairing and purchasing housing accommodation increased only 5.47 per cent, compared with 27.2 per cent for 2009.

An improved economy by the end of 2011 would lift the real estate market as would new policies such as Decree 71 and Circular 13 to create more market transparency.

The report said the real estate market was expected to be one of the most developed sectors in the coming year, when urbanisation increased and the infrastructure systems were more developed, especially in outlying  areas of major cities.

Another report released by the Business Monitor International Limited company based in London for the third quarter of 2010 revealed that rental rates fell by double digit through 2009 in Hanoi, Ho Chi Minh City and Danang.  According to this report, vacancy rates are generally running at around 30 per cent.

“Normally, in an economy that has been growing so quickly – that the authorities are tightening both fiscal and monetary policy in order to curb inflationary pressures – rents and capital values would fall until much of the vacant space is absorbed,” the report said.

However, it also cited that this was not the process of adjustment underway in Vietnam.

“The government has intervened to re-regulate the commercial real estate sector. Approvals for projects that have been proceeding slowly have been revoked,” it said. The aim of this measure may be to prevent and discourage speculation in a country where inflation has been rising.

More likely, it is a move to curb supply at a time that rental rates are under downwards pressure.

“Our sources – across the three different cities – are adamant that rental rates will stabilise in the coming year and rise in 2011. For the time being, we assume that this is what will happen because the government mandates it,” it said.