Four years after a real estate boom that saw investors camp out on the streets waiting to pay cash for unbuilt apartments, Vietnam's once-hot property market has caught a chill.
High inflation and interest rates along with a government-imposed credit squeeze have led to a fall in prices and other incentives to entice residential buyers, while office tenants benefit from a glut of space, experts say.
"The market is really, really, really tough," said Brad Gee, director of property management at the 68-story Bitexco Financial Tower in Ho Chi Minh City.
The skyscraper opened late last year and now has tenants in more than 40 percent of its office space.
"Obviously we have to drive hard bargains" on rents, but so does everyone else in the market, Gee said.
Monthly rents for top-quality office space in the city have dropped to less than half the roughly US$100 per square meter obtainable during the market's peak in 2007-2008, said one leasing manager.
Bitexco and two other recently completed towers also offering prime "Grade A" space have added to what analysts see as an oversupply in the city, Vietnam's commercial capital of more than seven million people.
The residential sector is also hurting, they say, because of high interest rates as Vietnamese authorities strive to tame soaring inflation.
"The banks are being restricted in lending to property firms, to non-manufacturing industries, and when they are able to lend it can be between 20 and 25 percent interest," said Craig Wallace, of property consultants DTZ.
"With that, we cannot produce, we cannot invest in property development," said Le Hoang Chau, chairman of the HCMC Real Estate Association.
At the same time prices of luxury apartments in the city fell more than 17 percent between late 2010 and mid-2011, to around $1,500 per square meter, according to the organization.
But while some property is becoming more affordable, many would-be home owners are caught in the credit squeeze, unable to get mortgages except at exorbitant rates.
Thai Quang Trung, manager of research at real estate services firm Jones Lang LaSalle, found himself caught up in the problems that he studies. With apartment rents high, he thought about buying his own home but was deterred by financing concerns.
Trung suspects that many other young people would be in the same situation if they depend on their own salaries to finance a home purchase.
"I'm just going to continue to rent," he said.
Long focused on economic growth, Vietnam in February shifted to stabilizing an economy beset by double-digit consumer price rises, dwindling foreign reserves and a weakening currency.
Measures included higher interest rates, a vow to cut state spending, and an order that growth in credit, or loans, stays below 20 percent.
Economists insist the government must stick to its stabilization package to control the country's numerous economic imbalances including an inflation rate that exceeds 20 percent, the highest in Asia.
"The government measures have really hurt the property industry in terms of pushing up interest rates," said Wallace.
Analysts say fewer projects are being launched.
"Obviously we've seen some projects being delayed. They try to avoid being on the market right now," said Trung.
Singapore-based CapitaLand, one of Asia's largest real estate firms, said its first Vietnam residential project The Vista condominium in Ho Chi Minh City which saw buyers lining up at its launch during the 2007 property boom was completed on schedule in September.
But the company said it was assessing the market before offering units for sale at another high-end development in the city, where the foundations have already been finished.
For buildings already put on the market during the downturn, developers are offering lower prices, financing incentives and even lucky draws and furniture, analysts said.
"I think that the real estate market situation will continue to be difficult... for the investors as well as consumers," said Chau, whose association has asked the government to gradually reduce interest rates.
The industry is looking to next year for possible relief.
DTZ's Wallace expressed hope that an easing of some government policies might occur early in 2012, with a drop in interest rates, while Gee said his "gut feel" was the downturn could last until the first quarter.
Huynh Buu Tran, head of sales and investments for Jones Lang LaSalle, said the market's potential was reflected in Vietnam's steady economic growth rate and population of about 86 million, more than 60 percent of whom work.
"A lot of that are young couples, and they all aspire to have their own home," she said. "So fundamentally in the long term I think there's still a lot of growth."