The Vietnamese real estate market, which is still characterized by cash purchases, will be affected by high interest rates and a significant pickup in demand is unlikely in the short term, says consulting firm CB Richard Ellis.
High interest rates make mortgages unattractive for end users while limitations on lending will likely stifle some of the new supply, the firm said in quarterly reports issued this week for markets in Hanoi and Ho Chi Minh City.
The government has tightened lending to non-production sector, including real estate and stock markets. Interest rates for the sector are between 18 and 22 percent a year, according to a weekly report published by the State Bank of Vietnam.
The CBRE reports note that both Hanoi and Ho Chi Minh City saw strong economic growth in the first three months, despite national economic worries. The capital city witnessed a 9.2 percent growth in GDP while the economy of the southern metro expanded 10.3 percent.
Hanoi's residential segment improved from last year, with new high-end projects attaining good sales rates. Meanwhile, prices in the secondary market remained stable overall and this price trend is expected to continue in the second quarter, CBRE said.
The situation was less positive for the residential market in HCMC. Primary market prices in the high-end sector dropped notably due to a drop in buyer confidence and increasing supply. Even the affordable sector saw softening of prices, the company said.
CBRE said there was also a "softening in demand" from Vietnamese retailers for retail space. However, the company said it sees continued interest from international retailers keen to profit from Vietnam's strong demographics.