Lower lending rates helped the residential market of Ho Chi Minh City recovered last year, but further decreases are needed for the market to be "sustainable and wider," property services firm CBRE said Tuesday.
More than 14,800 condominiums were launched last year, three times higher than in 2013, according to CBRE. The fourth quarter contributed most, with 6,760 units, thanks to several large-scale projects like Vinhomes Central Park in Binh Thanh District and Masteri Thao Dien in District 2.
Around 7,500 units were sold in the fourth quarter, double the performance in the previous quarter, Duong Thuy Dung, head of research and consulting for CBRE Vietnam, told a press briefing on Tuesday.
“The sales rate of the high-end segment in 2014 reached roughly 60 percent, followed by the affordable segment at 35 percent,” she said.
“Stalled building projects have restarted and construction progress has accelerated thanks to cheaper and more readily available funding,” Dung added.
Marc Townsend, Managing Director of CBRE Vietnam, said that families started to borrow money from banks to buy homes.
He said this is a big change from what happened in 2007-2008 – the period speculators and investors traded with cash.
“But what we are still waiting to see whether it’s going to be supported by genuine family buyers who look to own and occupy their residences,” said Townsend.
“If this number (the lending rate) stays low and becomes lower and banks become more competitive to offer home loans, the market will become much more sustainable and much wider,” he said.
Funding is getting easier and cheaper to obtain with the average lending rate from 17 percent in 2011 to 10 percent in 2014.
Townsend said though the lending rate experienced a deep drop, it is still “a very high number regionally.”
Banks in Vietnam are lending money at the rate which is three times higher than in Singapore and Hong Kong, and double than in Thailand, Philippines, and Malaysia, he said.
“I think that if banks continue to offer interesting home loans for first-time buyers and developers keep a very close eye on costs, prices, and payment terms, we could have a very interesting [market] two or three years ahead of us,” said Townsend.
He stressed that the most critical component of the property market is affordability.
“For the real owning and occupying market, the affordability is still the number one issue, even more important than location,” he said.
Townsend also said he expects falling oil prices to benefit the real estate sector through possible lower construction and building operational costs as well as stronger consumption.
Though the high-end segment remained a highlight in the condominium market with more than 50 percent of the total sales volume coming from this segment in the fourth quarter of last year, Townsend said “the key market is still the affordable market and middle-income market.”
As for prices, Duong Thuy Dung said primary prices in the fourth quarter continued to revise up thanks to good sales performance.
“A strong increase in price was witnessed in the mid-end segment, 15.5 percent year-on-year. This was mainly due to the reasonable prices and good locations of mid-end projects which led to high demand,” Dung said.
On the secondary market, while the mid-end segment’s prices showed improvements, prices in the high-end segment decreased by 5 percent year-on-year due to fierce competition from increasing new supply on the primary market.