Real estate investment in 2011

The demand for purchasing land and houses is predicted to increase in 2011 and many people will invest in real estate to reduce risk from devaluation of Vietnamese dong. Moreover, speculators are not likely to become involved in the market for apartments.

Investors change strategy

According to CB Richard Ellis (CBRE), a multinational real estate corporation based in the US, the real estate market will receive 16,000 more apartments in 2011, equal to the total supply for 2009 and 2010, and the increase in the supply of apartments this year will continue to surge 20 percent.

The large supply will force investors to make changes to improve their competitiveness. They have to carefully consider new product and study their consumers’ tastes, said Marc Townsend, CBRE Director General.

According to Townsend, the real estate market will attract more investors as the VND decreases in value. Some investors will open real estate agencies and employ their own sale teams. They will offer more flexible methods of payment and they are ready to expand their budget for advertising and marketing.

Some key infrastructure projects were completed in 2010, including the Le Van Luong Road and Thang Long Boulevard which will improve the link between the city centre and the developing districts in the west and make the real estate market in those areas more attractive. This trend will be continued in 2011 along with the construction of the National Highway No. 32, the South Ha Dong Road and the expansion of Pham Hung Road.

There are two main factors that confirm Vietnam is still an attractive destination for investors, said Townsend.

First, Vietnam is expected to witness a large number of investors returning to the market, especially in private investment. This was mentioned by Mark Mobius, president of the Templeton Emerging Markets Fund in an interview with Reuters. He also said that Vietnam is one of the three pioneer markets.

Second, Vietnam belongs to the top five emerging markets for real estate in 2011 along with China, India, Brazil and Mexico, said the Association of Foreign Investors in Real Estate (AFIRE). This explains why CBRE is preparing to expand its operation in Vietnam, especially in Hanoi.

Capital pressure

Not only real estate investors, but also those in some other industries have to face the challenge of capital in 2011.

Bank interest rates are high which make difficult for real estate investors to access loans. This pressure will force them change their strategy, said Townsend.

Some experts say that, people will choose to invest in gold n 2011 for its profits increased 30 percent in 2009 and 35 percent in 2010.

Last year, the total value of foreign currencies poured into Vietnam reached US$8 billion, however, most of them were in the gold market.

The Vietnamese gold market is so attractive that it will very hard to draw the investors’ attention to real estate. Borrowing money from banks to purchase real estate will always be the last option, said Nguyen Viet Hung, a sales manager in a real estate agency.

This proves that the country does not have a basic foundation for the real estate market to develop sustainably, said Townsend, adding that the source of capital will return to the market if gold looses its value.

Also according to Townsend, speculation in the real estate market is decreasing in Asisa, however, the price for land and houses in the northern regions of Vietnam is still much higher than those in Ho Chi Minh City. – VOV

Tags: vietnam real estate market, Vietnam real estate market 2011