Cut in interest rates fail to boost Hanoi property market

Capital infusion in the realty market has been a growing concern. Still, scarcely have any movements been found even after interest rates have been brought down to 17-19 percent for one month.
For the last three months, transactions in the apartment for sale market in Hanoi have been found mostly from end-users rather investors and speculators, according to real estate consulting agencies Savills and CBRE.

Prices for mid-range and low-end apartments stay firm whereas those for high-end and luxury segments have seen a slight decline over the previous quarter. A modest price upsurge of 3 percent has been found in the eastern areas (Long Bien and Gia Lam) and the western including Cau Giay District and Tu Liem District has been fairly stable whereas the common prices in Ha Dong District have continued the insignificant downward trend.

Residential areas have been sluggish with selling prices continuously on decline.

CBRE’s survey indicates a 22 percent tumble in prices and a 15 percent-25 percent decrease in the number of projects among 67 residential areas over quarter 2 this year. 68 percent of the projects have seen the prices unchanged whereas many others have experienced decreases since quarter 2. Merely around 10 percent of the total projects which either is nearly complete or saw a sharp decline in quarter 2 has made a slight
rise.

The market performance is largely contingent on available cash/credit in the economy.

In all likelihood, many projects that are expected to be complete in 2011-2012 may fall behind schedule. What is more, the actual effects of the central bank’s efforts to bring down interest rates in the recent times would take time to come, according to CBRE.

According to Tran Nhu Trung, director of Research and Consultancy at Savills, a survey on when the property market to prosper has been conducted among more than 50 property developers. Around 20 percent reckoned that the market rally would come in three years’ times or unknown while 25 percent assumed one year and the remainder one or two years’ times. What is noteworthy is that the predicted time would be “year” rather than “quarter” as earlier.

Short-term thinking used to be typical of developers and investors alike since Hanoi property market has now seen around 50 percent of the projects slashing prices against the preceding quarter. Yet, around 90 percent year-on-year increase has been observed, which would raise the necessity of long-term thinking, according to Savills.

Implications of interest rate cuts on the realty market would not be evident in some quarters’ times, Nguyen Minh Tuan, vice director of Research and Consultancy at CBRE said.

Normally, the real estate market would feel the instant impacts of foreign exchange rate fluctuations, yet wait for some time for those of interest rate lowering to come partly due to existing loans that was taken out at previously higher rates. Moreover, interest rate adjustments would be of more influential on developers and investors than on buyers since loans for house purchase are not popular in the Hanoi property market.

“Currently, many lenders have run out of room for property credit, which would make loans to this sector inaccessible despite interest rate cuts”, Tuan added.

Therefore, it stands to reason that the market now seek financing from residents’ savings, idle capital of small investors as well as foreign direct investment.

“The two first channels in Hanoi and northern provinces, even in the south are estimated to be abundant. Yet, what is puzzling is to restore their confidence in the market recovery so as to channel capital in the currently stagnant market”, Dang Hung Vo said. – Source: Vietbiz24.com

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