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Property market afloat due to short supply
The real estate market remains "compelling" thanks to a relatively limited amount of supply compared to demand which remains high since businesses continue to try and cut costs, says a recent report from Jones Lang LaSalle.
"People and real estate costs are often the first addressed as they represent the largest items on company balance sheets," Andrew Brown, country head of the US-owned real estate service firm in Viet Nam, said.
"The current environment is causing fewer new foreign real estate investors to enter the country while many multinational corporations are scaling back operations," he said.
His firm expects that in the short term, the market will largely be led by Vietnamese investors and occupiers looking mainly for low- to medium-end opportunities.
It is thus predicting the low- to medium-end residential, office and hospitality sectors in particular to outperform the premium end through 2010.
"The retail sector seems less impacted at the current time which can probably be attributed to the dearth of modern format supply and retail sales, which remain robust," Brown said.
The HCM City office market has experienced the greatest fluctuations of any sector in the past 24 months since Grade A buildings hit a peak in the middle of last year at US$86 a square metre a month. They have dropped to $57.5 now and are possibly headed lower.
"The magnitude of decline will depend on the extent of growth in the previous upturn and the supply/ demand balance in each market. As such, we expect further declines in office rents in HCMC through the balance of 2009," Brown said.
The bulk of the weakening in the economy has come from industry and the contraction in manufacturing, given the poor export performance and outlook.
But countering this, the construction sector has rebounded as a number of projects that were stalled during the inflation scare last year are again under way now. More of this can be expected through the year end there will also be a boost front the Government's efforts to speed up projects.
But the country is perhaps suffering less that many others as indicated by economic data. In the first quarter, the economy grew 3.1 per cent, making Viet Nam an out-performer in Asia.
VietNamNet, VietNamNews
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