Vietnam housing market makes positive moves but recovery incomplete: Savills

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The apartment market in Hanoi and Ho Chi Minh City showed positive signs in the third quarter with higher absorption rates but it is too soon to say that the market has fully recovered, property consultancy Savills Vietnam says.

In Hanoi, the apartment absorption rate was 9 percent in the third quarter, up 2 percentage points from the second quarter thanks to the strong performance of projects with good construction progress, lower prices and a variety of promotions, the company said in a report released October 9.

While the average price of Grade C apartments remained unchanged quarter-on-quarter, both Grade A and Grade B decreased. Grade A apartments were offered at VND 61 million (US$2,900) per square meter, falling by 2 percent and Grade B apartments at VND 32 million ($1,500) per square meter, down 3 percent.

"We saw positive figures, but people shouldn't "˜embellish' the property market. The 2-percentage point increase in the absorption rate isn't a sharp rise. Therefore, concluding that the market is hot again isn't right," Tran Nhu Trung, deputy director of Savills Hanoi, told Tri Truc Tre newspaper after releasing the quarterly report.

"However, the positive figures trigger big hopes for real estate developers to sell apartments to customers with a real demand of accommodation, Trung added.

In Ho Chi Minh City, as of the third quarter this year, transactions had impressive growth and achieved the highest number of sold units since the third quarter in 2011, up 52 percent year-on-year, Savills Vietnam said in a report released on October 8.

The overall absorption rate was 12 percent, increasing by 4 percentage points from the second quarter, the report said.

The majority of transactions were Grade C apartments with average prices ranging from VND12 million ($570) per square meter to VND17 million ($800) per square meter.

In the retail sector, both Hanoi and Ho Chi Minh City witnessed decreases in the occupancy rate and the average rent.

As for Hanoi, the average occupancy rate fell by 2 percentage points to 85 percent this quarter, partly because of a significant increase in the retail area. A mega shopping mall in the Thanh Xuan district was opened with a leasable area of 181,000 square meters.

The new shopping mall offers affordable rent and flexible payment schedules, forcing other retail centers to lower rental rates, Savills said in the report. The average rent saw a 2-percent drop to VND 1.2 million per square meter per month.

Ho Chi Minh City's retail market had softer performance compared with the previous quarter due to a decrease in average occupancy for all retail types in all areas. The average rent decreased by around 2 percent and average occupancy declined 3 percentage points.

In the villa and townhouse sector, while the Hanoi market remained soft in the third quarter, the Ho Chi Minh City market showed better performance. The number of transacted villas and townhouses increased by 11 percent and the absorption rate was up 2 percentage points from the second quarter. The land plot segment had a significant rise in transaction volume, up 39 percent.

Given that the central bank cut its refinancing rate to 7 percent in May this year and it is expected to keep the monetary policy on hold through 2014, the residential market will be supported, Savills said in the report.

The property consultancy also said that once a recent proposal by the Ministry of Construction in which foreigners are allowed to buy houses is accepted, demand for villas and townhouses may increase.

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