Winter could signal end to real estate ‘big freeze’

Industry insiders are hoping that next year will see a more buoyant property marketPhoto: Le Toan

According to Jonathan Tizzard of Cushman & Wakefield Vietnam, a range of positive signs have been observed in the past few months, encouraging the real estate market.

“The bad debt in the banking system is a major issue that has stifled the economy in recent times. The problems have not been worked through, but they are being addressed, whether it is through the Vietnam Asset Management Company or the banks identifying their problems and working out their bad loans themselves,” said Tizzard.

The slow recycling of real estate, Tizzard added, was the collateral of this bad debt, and should not be seen as a negative sign. On the contrary, it was described as being part of the normal market cycle as real estate is re-priced at a level that is more attractive to the market.

“When inefficient real estate developers are allowed to ‘sit’ on their unproductive assets, this causes stagnation in the market as has been the case in Vietnam for some time. We expect to see more distressed property being offered to the market in 2014,” he predicted.

Cushman & Wakefield’s experts believe that Vietnam’s monetary environment has been stabilised, particularly as the importance of gold as a currency has diminished and faith in the dong restored. In addition, inflation has very much been kept at a sustainable level and interest rates are coming down. While this has many effects upon the real estate market, the most important over-arching point has been that confidence has slowly been restored to the marketplace.

Vietnamese traditionally invest in gold or real estate, and after many local investors lost out in the gold bubble in 2013, anecdotal evidence suggests that the perception of gold as a safe investment has been skewed, with real estate set to benefit.

Apart from the recovery in domestic demand, Cushman & Wakefield expects an increase in foreign demand for Vietnamese real estate.

“It is being proposed in the National Assembly that there will be more equal treatment between foreign and domestic entities in Vietnam,” Tizzard said.

In agreement with Cushman & Wakefield is last week’s report from Viet Capital Securities. Viet Capital Securities believe that the price of real estate in Vietnam has reached its bottom line, particularly in Ho Chi Minh City.

“We predict that there is little possibility of further reduction in prices in the coming time, because if the prices go any lower, developers will be selling their products below the input costs,” the company said.

Any further pressure to reduce prices would have to come from developers lacking liquidity, which would present a good investment for other investors looking to speculate on the market.