Apartment market stagnant on huge supply

The number of apartments sold in 2012 is expected to be one third of the total supply in the market. Moreover, common tardy completion of projects has made the purchase of finished and nearly finished projects less risky.

The early months of 2011 saw seemingly stable apartment prices in Hanoi and even signs of some pickups. However, the close monitoring of dollarisation by quoting prices in dong rather than US dollar in the light of dong depreciation of 10pct against US dollar has failed to make such price increase real positive.

The quarter 2 2011 witnessed the supply of the whole market surging by 16,000 apartments that was equivalent to third quarters of the entire year’s total figure over 2010, which raised the necessity of boosting demand. This period also witnessed a range of promotional programmes which offered plenty of discount, gifts and the like to customers.

Nevertheless, conflicts arising out of condominium management fees at several projects in Hanoi, to some extent, discouraged potential buyers.

In addition, the central bank’s requirement on commercial banks’ lowering outstanding loans in property sector from 22pct in 30 Jun 2011 to 16pct by the end of the year took a heavy toll on investors.

Consequently, prices of apartments of all segments tumbled altogether till the year end. However, developers’ capital difficulties could hardly been tackled due to the lack of potential customers. Housing prices for 2011 were estimated to fall 20pct-30pct, according to real estate consulting firms.

More than 15,000 new apartments were offered for sale in 2011, of which the number of finished ones only accounted for one sixth or 4,000 apartments, CBRE reported. Therefore, in the light current capital difficulties accompanied by low apartment market absorption rate could give rise to continued delay in handing over flats in 2012.

Notably, an average of 13,000 apartments were sold in 2010 and 2011 each whereas the total supply for 2012 is expected to reach 38,500 apartments, of which stockpile for 2011 are 16,500 apartments and 22,000 apartments will be brought onto the market in 2012, revealed Marc Townsend, CEO of CBRE. “A such, considering the average sale in the two previous years, the market would take three years to fully absorb the total supply of 2012″, he assumed.

What is noteworthy is the abundant source of capital in residents as the sharp increase in sale of personal automobile in 2011 over the previous year was reported. Currently, many capable investors stay out of the market watching on expectations for further price reduction. Those of real demand are advised to purchase finished and nearly finished apartments so as to reduce potential risks.

Source Intellasia | Dan Tri

Tags: Vietnam Property market, Vietnam real estate, vietnam real estate market