Prices continue shrinking
Since realty fever in 2007, the condo segment for the first time has experienced a free-fall in price in the primary market, said an executive of CB Richard Ellis Vietnam (CBRE) at a recent press briefing relating to real estate in the capital city. Around 53% of newly-launched apartments in the first quarter were priced at below VND21 million per square meter at favorable locations like My Dinh, Dinh Cong and Cau Giay urban area.
Meanwhile, prices of housing products in the secondary market have still continued on a downtrend, at around 11% year-on-year. The presence of a meager 1,100 flats as new products on the market this quarter proved that not only homebuyers but also enterprises and developers are sticking to a ‘wait-and-see’ attitude, noted CBRE executive director Richard Leech.
Notably, several project owners are tending to prolong or even halt construction progress in spite of good business with other projects.
Statistics by Savills Vietnam also recorded the deepest price plunge of the medium-cost apartment segment this quarter, at 9%, compared to the last quarter in 2011. The fact showed that prices of all segments in the secondary market were falling in most districts on average. The leading property services provider attributed the price fall to low liquidity of the market since the middle of last year.
A lot of experts predicted 2012 would be the year of the middle-priced apartment sector. However, data collected by Savills Vietnam in the first quarter indicated the consumption ratio of grade-B flats, or middle-priced products, stayed at 3%, down nine percentage points from the previous quarter. Similarly, grade-A condos, or high-class apartments, saw transactions reach 2% during the first three months, thus no change from the preceding three quarters.
The combined consumption ratio of the whole market stood at 7%, sliding by five percentage points against the fourth quarter in 2011.
According to Savills Vietnam, the local market will see a new supply of roughly 45,000 flats from 52 projects in the next three years. This will put much greater pressure on the sluggish realty market, especially as the number of unsold housing products by Hanoi’s investors is fairly large, at about 16,500, as reported by CBRE.
Most specialists shared the view that the current stagnant market had resulted from increasingly-rising misconducts of developers and investors in terms of construction progress and legal procedures, seriously dampening confidence among consumers. Due to financial constraints, the absence of speculators accounting for up to 60-70% of the total demand was also cited as the reason behind the weak liquidity of the market.
A series of disputes between developers and homebuyers in recent times have also discouraged local buyers from looking for apartments developed by project owners.
The market has showed some signs of improvement with a slight recovery after being frozen for a long time, reckoned Pham Trung Ha, director of property company Hoa Phat.
The ceiling deposit rate was revised down to 12% a year but high lending rates plus concerns over dull outlooks and the maximum credit growth rate of 17% annually at banks as required by the central bank have led to a poor appetite for property loans among lenders. Therefore, project owners and those wanting to buy homes to live in have found it hard to access bank loans.
Not right time for secondary investors
Regarding the ample housing supply in Hanoi, Leech of CBRE said this was a good time for those in dire need of housing, not for either secondary investors or speculators, but to buy homes to live in.
Borrowers taking out bank loans are still charged with unaffordable lending rates, so the lowered deposit rate cap is aimed at reviving the psychology of house buyers only.
To increase liquidity for the real estate market, experts advised local firms to pay attention to the total area of every condo, prices as well as quality and flexible payment methods in line with clients’ demands.
Local industry insiders have difficulty identifying consumers’ demands, so they are unable to match supply and demand at home as expected, Tran Nhu Trung of Savills Vietnam added.