Abundant supplies in 2011 biggest challenge for builders, experts say

Abundant supplies of houses and apartments are set to be the biggest challenge in 2011 for property firms, experts said.

Customers watch house profiles at a HCMC-based property firm (Photo:Minh Tri)

Statistics show there are up to 80,000 unsold apartments and around 40,000 more will be available this year. The real estate market meanwhile remains quiet.

Some property enterprises already closed for the Lunar New Year holidays, as there was no trading. Experts said the property price in Hanoi has surged to “unacceptable levels” due to speculation.

“People are also less willing to buy property now as they will have to pay 70-90 percent of the entire value in advance,” said a broker in the capital city.

Speculators are also staying away from the market, waiting for new property policies of the government in the year. Especially they are eyeing social housing projects, which are expected to make healthy impact to the market in 2011.

Statistics from the Ho Chi Minh City Department of Construction (HDC) show 8,300 social houses were built in Ho Chi Minh City, with the total investment of more than VND422 billion (US$21 million), coming from the city’s budget, and loans by the Development Assistance Fund or the Vietnam Bank for Social Policies.

There are four social housing projects in Hanoi, with three being built by the city’s budget and the remainder by local businesses’ investment, according to the Hanoi Department of Construction.

Brokers said investors and enterprises worried that the central bank would tighten property loans as the government and central banker said they would focus on production sector this year.

Some investors warned the market would continue to “hibernate” in the first three months of the year.

Lights at the end of the tunnel
Despite the sluggish market, the property consultancy CB Richard Ellis remains optimistic, reporting some segments remain profitable.  

Residential houses and villas in Hanoi will keep going up by an average of 12-15 percent. The leased office segment is showing some signs of recovering as 32,600 square meters of offices classed A and B were built in the last quarter last year, the biggest amount since 2007.

In the south, the market is expected to be “awake”, with many property projects making debuts in some provinces adjacent to Ho Chi Minh City, including Binh Duong and Dong Nai.

According to the Dong Nai Property Association, big builders including Sonadezi, Tin Nghia, Toan Thinh Phat, VinaCapital, Keppelland and Berjayar announced many projects in Dong Nai province.

They comprise of the East Saigon Town with the investment of US$6 billion and the area of more than 940 hectares, and the project of turning the Bien Hoa Industrial Zone into a 335-hectare residential zone.  

The increasing capital requirement in 2011 will force house builders to issue enterprise bonds and shares in foreign countries, Savills Vietnam said in a report.

CB Richard Ellis also noticed the competition of the real estate market in 2011 would be harsher, leading property firms to enhance marketing and release more promotional packs.

By Khoi Nguyen and Binh Minh – Translated by Tien Minh

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