Investors are focusing on the long-term potential of Vietnam's property market as the majority of markets in Asia Pacific still offer "excellent" prospects, according to a new report by real estate services firm DTZ.
"Vietnam has seen challenging investment conditions during the third quarter," said KP Singh, general director of DTZ Vietnam. "Investors looking toward Vietnam have been cautious over the first nine months of 2011, being deterred by issues such as high inflation and finance rates, lack of credit and a weak currency in Vietnam."
However, Singh noted that investors have by no means given up on Vietnam's property market, with many parties looking at the negative macroeconomic factors as a short-term phenomenon.
"We have found that, in particular, cash-rich investors are actively exploring opportunities to accumulate land and property from vendors who are finding themselves in "˜fire sale' situations and are therefore more open to selling property at lower pricing levels," Singh said. He added that constraints are leading to many opportunities for joint ventures to be formed.
Vietnam's real estate sector has struggled this year as developers and homebuyers alike find it hard to apply for bank loans. Although the central bank has eased the credit squeeze for certain projects, some industry insiders say the market needs more support to start picking up.
According to DTZ, Asia Pacific markets are holding up, but the outlook has become more challenging. DTZ's fair value index for the Asia Pacific, which indicates the attractiveness of property markets in the region, fell to 58 in the third quarter from 70 in the second quarter.
Still, the region continues to compare favorably with other markets, the company said.
"Investors are set to benefit from stronger rental growth associated with a more positive economic backdrop than in the US and Europe," said Chua Chor Hoon, head of Asia Pacific Research at DTZ. "Asia Pacific all-property rental growth is expected to outperform global rental growth in 2011, although forecast growth of 6.3 percent this year is slightly down from last year's figure of 6.8 percent."
But Tony McGough, global head of forecasting and strategy research at DTZ, warned that while the Asia Pacific continues to perform well, the region could be hit by an escalation in financial turmoil, as many of the region's economies are reliant on export demand from European and US markets.