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Property market still dark
Despite the Vietnamese government’s latest moves aiming to increase the liquidation of the real estate products, the forecast for the property market this year remains gloomy.
Marc Townsend, general director of CB Richard Ellis Vietnam, said that the year 2013 would remain a buyers’ market, in which end-users could find good deals and speculators would stay away.
Townsend forecasted a further decline in sales prices by about 10 per cent. “Transactions will remain low and be concentrated in projects with highly attractive price points and good construction progress,” he said.
Meanwhile, developers’ price reductions will continue, but will not stimulate demand until the discount is at least 30 to 50 per cent of the original price.
“Therefore 2013 is expected to continue to be a tough year for developers,” Townsend said.
Another real estate consultant, Knight Frank Vietnam, also predicted a gloomy market in 2013, with prices decreasing in the first half of the year, if no significant movement and incentives from the Vietnamese government were implemented to resolve the situation.
Most of the potential transactions are expected to be focused on the affordable segment, which currently attracts the most buyers.
Dang Dinh Tuan from Hoa Binh Real Estate Company said that the real estate market would need five to seven years to be fully recovered.
“Legal policies to define the ownership among developers, banks and buyers must be more perfect, as well as the evaluation, management and risk prevention would be also improved,” Tuan said.
According to CBRE, in 2012, the launch of new condominiums dropped by 65 per cent year on year, explained by developers’ increasing caution since the second half of 2011. The completion of condos in 2012, in contrast, was the highest on record. This indicates that many developers are still committed to their projects despite market uncertainty.
The past year was marked by significant price reductions and an interesting shift of public attention from the secondary to the primary market.
In early 2012, individuals sustained dramatic losses as secondary market prices plunged up to 30 per cent below purchase price.
Conversely, in late 2012 developers aggressively slashed their asking prices by up to 40 per cent of the original price.
Overhanging unsold units proved controversial in 2012. CBRE’s estimates that Hanoi currently has 20,500 unsold units and Ho Chi Minh City has 28,000 unsold units that developers have launched but are unable to find buyers. Hence, the two cities will need many years to absorb, depending on how the market recovers.
Recently, developers in Ho Chi Minh City have attempted to unite in a “no-further-price-cut” strategy.
“This raises the question of whether further price reductions could stimulate demand in this market,” said Townsend.
CBRE finds that end-users’ current inaction is more a psychological issue than an affordability issue.
“Even when a person can afford a unit, they hesitate to complete the purchase due to reasons such as expectation of further price drops, distrust of developers’ ability to deliver on their commitments, or the perceived overpricing of projects due to continuing price competition,” he explained.
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