HANOI – The property market will see signs of recovery if policy changes are flexible, interest rates are stable and more capital flows into liquid market segments, according to a foreign property firm. However, some property market segments are grappling with price cuts, low absorption and oversupply.
Statistics which market research firms released in the first quarter show apartment prices in Hanoi were declining. According to Savills Vietnam, most districts in the capital city saw apartment prices in the medium-cost segment in quarter one falling, 9% at most, compared to last year’s fourth quarter.
The absorption rate in the medium-cost segment was a slight 3% in the first quarter, dropping by nine percentage points, while that of the luxury segment did not change much, at 2%. The whole market recorded an average rate of 7%, down by five percentage points from the previous quarter.
Similarly, according to CBRE, investors have steadily lowered their offered prices on the primary market with up to 53% of new apartments sold at less than US$1,000 per square meter.
Despite the price drop, Arsh Chaudhry from U.S. firm Cushman & Wakefield said that apartment prices were normally seven times higher than people’s average annual incomes in many countries but in Vietnam, it was 26 times.
Although condo prices have edged down and the absorption rate remains low, new supplies are still trickling in, exclusive of unsold apartments of the previous quarter.
Figures from Savills Vietnam indicate around 52 apartment projects with some 45,000 units will be up and running in the next three years while the number of unsold apartments of old projects in Hanoi last year is around 16,500.
The year 2012 will be a tough year for investors, and they will have to revise their development plans and make full use of their own capabilities, instead of relying on support policies, said property services and management firm Knight Frank Vietnam.
According to a latest report by CBRE, around half of urban area development projects in Hanoi saw a secondary market price decline of 5-10% in the first quarter.
The discount rate is different in three groups of urban areas, depending on the construction progress and ranging from 5% to 15%. Meanwhile, the price of completed projects does not change much or even increase slightly.
However, the secondary market price has dipped 20-50% compared to the first and second quarters of last year, the high-price period over the past two years.
Currently, Hanoi is having 117 projects with around 40,000 homes underway. The number of newly built homes will soar in the future when 68 projects covering 8,700 hectares join the market.
While the property market in Vietnam is in difficulty, many investors are planning to sell off their projects to cut further losses. So companies, especially foreign ones with financial capabilities, can buy them in anticipation of a future market improvement.
Arsh Chaudhry from Cushman & Wakefield said local property projects would be attractive to foreign investors if transparency and effective controls on interest rates and inflation were guaranteed.
Source: Saigon Times