Cautious optimism in vietnam

Vietnam’s real-estate market is likely to flourish again, as economic headlines out of that country in the first and second quarters indicate that improvement is being driven, according to research by global real-estate services firm CB Richard Ellis

Positives do remain, the company said, with national GDP growing by 5.67% year on year in the second quarter and Ho Chi Minh City’s GDP growing by 9.9%, demonstrating the continued strength of that city.

Reflecting on Vietnam’s present economic situation, CBRE’s managing director in Ho Chi Minh City, Marc Townsend, said it was a relief to see that prudent measures taken to control the economy could now be having some effect. In June, inflation showed its slowest month-on-month increase for the year.

There remain issues to be resolved within the economy and the monetary markets, and only when these have been settled can the real-estate market be expected to flourish again, he said. However, progress has been made and it is hoped it will continue.

Turning to the office market, and continuing a longer-term trend, office rents across all grades continued to decline during the second quarter. The rental slide in the period ranged from 1.9% in the Grade A market to 1.4% in the Grade C market. This is a result of a softening in demand as both foreign and Vietnamese enterprises maintain a cautious approach to expansion, and as new supply continues to come online, albeit at a slower rate than in the first quarter of this year, he said.

In addition to the supply-side pressure, it appears that demand-side pressure continues to influence rents. The second quarter saw 37,865 square metres of new supply come online, and although this is down on the 42,000 square metres seen in the first quarter, it is still a considerable amount.

The villa sector, which saw success in 2010, continued to look stronger than the condominium sector. Prices within the primary market remained flat and developers are yet to offer the incentives seen in the condominium sector.

Townsend said that given the current overhang of unsold condominium units it was natural that prices would drop off in all sectors, especially given the current confidence levels in the buyer market. However, the villa market does not have the same overhang of supply, and since Vietnamese buyers, like those across the globe, favour landed properties, prices in this sector are expected to remain more stable.

In the retail market, rents in the central-business-district (CBD) department stores increased 6.1% quarter-on-quarter, whilst shopping-centre rents in the CBDs remained stable, showing no change from the previous quarter. When considered on a year-on-year basis, rents in department stores are showing a 13.2-per-cent increase while shopping centres are currently trending flat, emphasising that new rental levels set last year have been maintained.

In non-CBD areas, the most obvious identifiable trend was year-on-year decreases in asking rents at both shopping centres and department stores. Department stores showed an 11.5-per-cent year-on-year decrease, while the slide was 16.1% in shopping centres

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