The residential property market in Ho Chi Minh City has been hit hard by the government's tight monetary policy and buyer confidence is not likely to improve anytime soon, real estate companies say.
Consulting firm CB Richard Ellis said in a report released Wednesday that the residential market will continue to be sluggish as purchasing power is not expected to increase immediately.
"In general, prices across all segments continued to decline in the second quarter of 2011," the company said. "Fewer residential buyers can complete all cash transactions, and mortgage loans are proving even less popular than before."
Developers are likely to continue campaigns to stoke sales, CBRE said, adding that international developers were now firmly established in the mid-end sector.
Another service provider, Savills, also said in a report that the tighter monetary policy has lowered affordability for homebuyers. As a result, low-priced apartments are seeing the highest number of transactions, the firm noted.
"More than 50 percent of the apartments that sold were under US$750 per square meter. A downward adjustment in prices might improve market performance," said the Savills report, also released Wednesday.
The company said it expects 32 apartment projects to be launched in the next two quarters, supplying approximately 26,000 units in total. However, large projects will launch their products in many phases, it said.
The office market has also been caught in a slump. CBRE said the number of enquiries for space has been decreasing and the next two quarters of 2011 are unlikely to see large gains in net absorption.
"It is expected that increases in the amount of absorption will be seen once macroeconomic conditions stabilize and confidence returns," the company said.
Meanwhile, Savills predicted that the continuously increasing supply will pressure office rentals over the second half of 2011.
It said average rents in the second quarter continued to soften, decreasing 3 percent compared with the previous quarter to $28 per square meter per month, while average occupancy reached 82 percent, an increase of 3 percentage points compared with the first quarter.
The State Bank of Vietnam has ordered local banks to cut lending for non-manufacturing purposes, including loans for real estate, to 16 percent by the end of the year. Analysts have expressed concerns that the market could fall apart due to the credit tightening.
Deputy Construction Minister Nguyen Tran Nam tried to allay concerns recently, saying that although the real estate market is experiencing a downturn, it would not collapse.