Luxury apartments continue to be the hardest hit amid the ongoing market slump as homebuyers are still waiting for prices to fall, according to new reports by Savills.
The real estate service provider said the Grade A segment in Ho Chi Minh City had an absorption rate of only 4 percent in the third quarter. The segment fared even worse in Hanoi, with a low absorption rate of 2 percent, almost unchanged against Q2.
Grade B and C apartments performed much better. In HCMC, Grade C had the most transacted units due to reasonable price levels, ranging from approximately US$550 to $1,550 per square meter. More than 70 percent of the apartments absorbed in Q3 belonged to this grade, Savills said.
"Purchasers anticipate further price reductions," the company said. "Those who have real living demand prefer renting a house and putting their money in banks to leverage the current high interest rate."
However, Savills said there are great signs for a reduction in interest rates, which will "likely improve the performance of the property market."
In Hanoi, apartments offered at less than $145,500 per unit received the most attention as the majority of end users are looking for well-designed small or medium-sized units, it said.
"With more than 50 percent of the population less than 35 years old, the apartment market has great potential in the long-term," according to the company.
Savills said around 11,000 new units are expected to be launched in Hanoi in Q4 while HCMC will have 3,400 new apartments in the next two quarters.
According to Savills, the HCMC retail market achieved an average occupancy of 86 percent, a slight increase of one percentage point compared to Q2. The average rent remained unchanged.
"The growth rate of retail sales of goods and services in the first nine months of 2011 was much lower than the same period last year, showing that consumer spending has been strongly affected by the high inflation," said the company. "This could lead further to a decrease in demand for retail space."
The occupancy rate in Hanoi's retail sector was 93 percent, up 4 percent, while rent was unchanged quarter-on-quarter. Local and international retailers expanded more outlets in the new shopping centers such as Pico Mall and Hang Da Galleria, Savills said.
The company said some projects have delayed construction due to limited financial capacity and such a trend could negatively affect future supply.
It expected some 1.6 million square meters of new retail space will enter the market in the next four years.