Real estate still promising for long-term investors

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Ho Chi Minh City as seen from the rooftop of a downtown building. Property prices are expected to fall in the next six months.

Developers are still pessimistic about market conditions but some experts believe investors should not rule out real estate just yet.

Economist Dinh The Hien said the government is expected to continue tightening monetary policy and restrict lending to the real estate sector, aiming to keep credit growth between 15 and 17 percent in 2012. This will have a negative impact on the property market, he said.

Hien said property prices are likely to fall in the first months of the year. The decline is likely to ease later and prices may stabilize in the third quarter but increases are unlikely, he added.

However, if prices hit their bottom in mid-2012, it will be an opportunity for long-term investors to buy cheap properties and earn profits one or two years later when the economy picks up, he said.

Vietnam continued to be named in the top five emerging markets for investment in 2012 in the latest annual survey of the Washington-based Association of Foreign Investors in Real Estate. The country made it in the top five for the first time last year.

This year, the survey respondents, who have more than US$874 billion worth of real estate holdings globally, rated Vietnam at number five out of 25 emerging markets, down one spot. The other top markets are Brazil, China, Turkey and India.

For real estate developers in Vietnam, many of whom spent most of 2011 struggling with financial problems, the year ahead is not looking promising.

Hoang Anh Tuan, general director of Tac Dat Tac Vang, a Ho Chi Minh City-based real estate company, said the market prospects are not good considering interest rates are still very high.

While banks have announced plans to lower interest rates, the average rate is still high, at more than 20 percent per year, Tuan said. "Who can take out loans to develop projects or buy properties at such rates?" he asked.

Another realtor who wished to remain unnamed also said high borrowing costs are the major challenge for the property market.

"With interest rates staying so high, I'd rather quit and deposit my money in banks because even if I try more, all the profit will only fill the pockets of banks," he said.

Le Chi Hieu, chairman of Thu Duc Housing Development JSC, said during these tough times property companies need to review their business strategies and solidify their financial resources.

His company has cooperated with other companies to develop residential projects, in an attempt to capitalize on the strength of each developer in terms of land and capital funds.

Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association, also said it's necessary for developers to work together to overcome difficulties.

He said the low-end apartment segment with prices below VND15 million ($710) per square meter is the hope for a market recovery in 2012.

Meanwhile, the Ministry of Construction said in a new report that recent declines in property prices are actually a positive sign as it means many people will have better opportunities to afford the home they want.

The heating up of the market and real estate companies posting huge profits a few years ago had led to misconceptions about market demand, encouraging more companies to enter the market and inflate prices, according to the report, cited by local media this week.

The ministry report also said a market collapse is unlikely.

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