JANUARY 2011:ISSUE 06 • The real estate news and information source • www.coldwellbankervn.
com
Real Estate Market
Predictions for 2011
The Southern real estate market in 2010 ended
with many ups and downs. In 2011, where will
the market go? What advantages and challenges
will the market face? The following forecasts
from businesses and real estate specialists may
give some insights of the southern property
market next year.
“Real estate will be
excitingly strong in the
second half”(according to Mr.
Le Hoang Chau, Chairman of
the HCMC Real Estate
Association)
According to Mr. Chau, last year, the Southern
property market had certain difficulties and
advantages. The excitement of the market only
happened in the short term and only focused on
the average to low price housing project
segment, while the luxury apartment segment
still faces may difficulties to meet liquidity.
Entering 2011, in his opinion, the property
market will recover and develop strongly
again. Currently, the government is determined
to curb inflation, regulate monetary policies
and hopefully new money flows will return to
the market next year. In 2010, the State issued
many policies to regulate the property market.
These regulations will help the market develop
more clearly and progressively in the long run.
The administrative procedures in the real
estate business field have also been simplified,
creating more favorable conditions for
business investments.
HCMC is the most populous city in the country
with a huge demand for housing. The general
situation today indicates that the market will
develop and become very exciting in the second
half of 2011. Still the major market segment in
the coming year will be the products with
average to low prices.
“The real estate business will
focus on the market’s needs”
(according to Mr. Pham Van
Hai, general director of ACB
Real Estate Company)
Mr. Hai said that considering each segment, in
2011, luxury products will continue to
underperform.The products will face difficulties
finding customers willing to pay high interest
loans to purchase apartments that are not
suitable for their needs and means. Only
customers who have excess cash or urgent needs
Vietnam is in the top four
of emerging real estate markets that are attracting
the attention of international investors
The Association of Foreign Investors in Real
Estate (AFIRE) has released reports on real
estate markets globally; according to which
Vietnam is ranked No. 4 in the emerging
markets according to the level of attraction for
foreign investors. The AFIRE survey was
conducted among investors holding more than
$627 billion of real estate globally, including
$265 billion in the United States. Of these,
approximately 65% of the respondents said that
the U.S. had the most promise to rise, exceeding
China by 10% coming in at No. 2.
In the emerging markets, Brazil has debuted at
No. 1 taking over China’s position last year.
China ranked second with India coming in third.
Vietnam was not ranked in the previous year, but
came in at a surpising No. 4, pushing Mexico
down to No. 5.
Reporters interviewed Mr.
Peter Ryder, General
Director of Indochina Capital
and successful American
businessman with a variety
of real estate projects in
Vietnam, around this story. Mr. Peter Ryder
* How would you evaluate the new rank of
AFIRE for Vietnam, especially in the context of
last year when Vietnam was not even ranked?
“In the survey of the 19th Annual AFIRE,
Vietnam is considered an attractive emerging
market for real estate ranking fourth behind
Brazil, China and India. We believe that this is a
result of the rapidly growing real estate market
in Vietnam and other provisions to allow for the
additional participation of foreign investors.”
* What is the true meaning of this ranking
VN-Index Expected to
Reach 650 Points in 2011
2011
HCMC – As the economic indicators of Vietnam
in 2010 showed positive signs for the future,
securities companies are expecting the local
stock markets to fair better this year. Many
estimate that the main index can hit 650 points
in spite of some macroeconomic uncertainties.
In its report of the 2010 economy and 2011
forecasts, Au Viet Securities Co. said that the
foreign exchange rates and inflation rates would
be an area of some concern to investors in the
first half of the year. However the stock market
in 2011 will experience less negative volatility
as investors have become more accustomed to
similar fluctuations in the previous year.
In a report from Vietnam International
Securities Co. (VIS), the company said that the
outlook for the equity market will certainly be
positive if Vietnam could achieve growth rates
Interest Rates
are Still a Hot Topic in 2011
One of the hottest issues on the currency
market last year was interest rates. The issues
surrounding the interest rate situation in
Vietnam have had a negative impact on
production, business activities as well as the
financial market. For instance, refinancing and
rediscount interest rates of the State Bank of
Vietnam (SBV) are lower than the business
interest rates of commercial banks; the VND
deposit rate is quoted lower than the actual
interest rate paid to customers; the dollar
lending rate is lower than the VND lending
rate, etc. Of particular concern have been the
“two-price” VND deposit rates which have
caused concern for both customers as well as
banks, currently struggling to settle and hide
the differences.
Floating interest rates
The banks’ recommendations for 2011 state that
they hope for an official deposit rate which will
be publicly and transparently maintained at just
one level.
The issues around interest rates were recently
discussed at a banking conference held by the
SBV regarding policies for 2011. A
representative of the Vietnam Banks
Association (VNBA) said that the interest rates
Nam Cuong Group Officially Offers 209 Apartments
of the CT7B Residential Apartment Building
The Nam Cuong Real Estate Trading Floor
under Nam Cuong Group is now selling 209
apartments of CT7B residential apartment
building (in the complex of Le Van Luong
residential, new urban area of Duong Noi, Ha
Dong District, Hanoi). CT7B includes ten
25-storey buildings with an area of 54m2 -
190m2/unit, priced at an average of VND 24.2
million/m2 (including Value Added Tax).
Payment methods are divided into six
installments. Installment 1: payment of 20% of
the apartment value after signing the agreement
(deposit value will be deducted from payable
value of the first installment). Installment 2:
payment of 20% of the apartment value after 3
months from the date of entering the agreement.
Installments 3, 4, and 5 (each installment lasts 2
months): payment of 10% of the apartment
value. Installment 6: payment of 30% of
remaining agreement value immediately after
Real Estate 2011
Much Potential for Development
The year 2010
ended with many
changes to the real
estate market in
Hanoi. Earlier in
April, the western areas saw its first land rush
with price increases of 40-60% for the Gleximco
project, North An Khanh, and the extension of
Le Van Luong District. While at the end of 2009
the transaction prices of the Van Khe land
subdivision fell to about VND50 million/m2,
prices now increased to VND100-120
million/m2. Areas such as An Hung, Duong Noi,
Van Phu, Kim Chung - Di Trach, and Tan Tay
Do along Highway 32 also had higher rates.
"Land fever" then struck in May when rumors
spread of the National Administration Center
being relocated in Yen Bai. As a result of this,
the land price in this area increased dramatically.
Prices for residential land in late 2009 and early
2010 for the area were estimated at
approximately VND2.5 -3 million/m2, whereas
in May 2010 the prices rose to VND6-7
million/m2. Perennial crop land prices that were
purchased by “sao” (360m2/sao) for $ 50-70
million per unit earlier rose to 200 million per
unit in May 2010 also.
Market information is a double-edged sword, as
assessment and accuracy make for stable
development in the property market. However,
it can also lead to severe consequences when the
information is inaccurate or misconstrued. Once
Quang Ninh Real Estate
More Choices for Investors
Quang Ninh province has much to offer: the
famous Ha Long Bay; the opening of Van Don
International Airport; the Mong Cai
international border gate (with busy trade
between Vietnam and China); and the Cai Lan
deep water port (one of the three deepest
seaports in Vietnam). These favorable
attractions for tourism and commerce have
gained the attention of investors towards Quang
Ninh, especially in its real estate market.
Its location along the seaside helps the province
bring more than more than 4 million domestic
passengers and over 1 million international
visitors each year. This has enabled the
provincial economy to steadily develop and as a
result, its resort real estate industry as well.
Moreover, the current real estate prices in the
area are quite attractive. Even though there are
not large price fluctuations in real estate as in the
markets of Hanoi and Ho Chi Minh City, the
property prices are still growing strongly.
Current land prices in urban areas such as Hung
Thang range from VND19-22 million/m2,
will select this segment.
He added that the average apartment segment in
2011 will experience tough competition. This
competition means that there are a large number
of customers in this segment and they are
willing to participate in the market. However,
attraction and excitement don’t just stop at the
project but also include factors such as suitable
location, the investor’s financial resources,
previous track-record in deployingprojects,
offering way, etc.
In short, Mr. Hai thinks that the projects in
2011 that will be the most successful will be
those that cater to the real needs of the market.
Real estate businesses must focus on activities
in detail and need capital to prove the safety of
the projects to the customers participating in
the market. The market in 2011 will continue
to have stiff competition and will take steps to
stop the phenomenon of many new businesses
being formed without the necessary capital
and experience.
“Cash flows are expected to return soon”
(according to Mr. Nguyen Vinh Minh Thanh,
General Director of An Cu Lac Nghiep Co.)
As of late 2010, the Southern property market
transactions seem to be frozen. This is easy to
understand because the government is trying to
control inflation. Soaring interest rates give
“shelter” to hoarding and speculation. However,
he thinks the market in 2011 will prosper with
controlled inflation and lower bank interest
rates. He also expects the emergence of new
cash flow, especially cash flow from the public
into this market.
The real estate market in the South has suitable
prices for investment. Previously this market was
affected by the impact of new policies and people
with the development of the real estate
market in Vietnam?
“In the context of real estate investments
worldwide today, the real estate market in
Vietnam has proved appealing from domestic
demand and the resilience of the economy,
supported by factors such as economic growth,
the process of rapid urbanization and the
formation of a new middle class. Although the
investment environment remains challenging,
the real estate market in Vietnam is still
attracting interest from institutional investors
globally.
AFIRE’s survey shows the interests of
international investors in Vietnam’s real estate
market, a trend that has markedly been
increasing since 2010, and would likely
continue if the economy of Vietnam maintains
positive growth.
With the ongoing pursuit for perfection of the
market for commercial and housing real estate,
Indochina Capital expects long-term interests of
foreign investors. For example, the recent
cooperation of Indochina Capital with Orix, one
of the biggest financial service companies in
Japan, centered on their interests in accessing
investment opportunities in real estate market of
Vietnam.
The relatively positive economic growth in 2010
has brought optimism to the real estate market.
Since the recession in 2008, many projects have
begun in all fields, with the considerable
increase of supply source for the office market
in Hanoi and HCM City, as well as in the market
for housing and resorts. The market has been
witnessing remarkable growth from both
demand for renting and demand for investing.
Since early 2010, Vietnam’s real estate market
has gradually improved correspondingly to the
continuous expansion of the economy, since the
orbit of the real estate market in the country has
been linked to the economy. With the brighter
outlook of the domestic and global economies,
the market for commercial and residential real
estate of Vietnam has been having positive
development momentum, a trend that Indochina
Capital predicted to continue until 2012.”
of 7-7.5% this year.
VIS also added that Vietnam’s market has
started to see more foreign funds exploring the
market since the end of 2010, another positive
sign as these foreign capital inflows to the stock
market have been declining for the past three
years. VIS estimated that by the end of 2010,
foreign direct capital in Vietnam totaled
approximately $7 billion, falling 40%
compared to 2007.
The capital raising plans of banks will positively
affect the local stock market in the long term as
was seen in 2010. However, brokers said that the
plans will initially have negative impacts as
capital flows into the market will decrease.
Both firms above contend that with Vietnam’s
stronger economic fundamentals the main
VN-Index would hit a high of 600-650 points
during the year despite last year’s poor
performance.
The last session for the VN-Index in 2010 ended
in the black, up 3.26 points to 484.66. This was
a 2% drop compared to the beginning of that
year; however the index did reach 551.4 points
at one time in 2010.
Other factors in 2010 also affected capital flows
into the stock market such as high gold prices,
volatile foreign exchange rantes and increasing
for 2011 have been clearly prescribed in Article
91 of the Law on Credit Institutions 2010 as:
“Credit institutions may fix and shall publicise
deposit interest rates and service charge rates
applied in their business activities. Credit
institutions and their clients may agree on
interest rates and credit extension charges to be
applied to their banking operations according to
the law”. However, the representative also said
that under the law, “in case banking operations
experience abnormal developments, in order to
assure safety for the credit institutions system,
the State Bank may provide a mechanism for
determining charge and interest rates applicable
to business activities of credit institutions”.
While some experts claim that market
mechanisms should be applied to interest rates, a
majority of large and small banks agreed that
they would prefer the SBV to set ceilings for
VND deposit rates. They feel that a free market
in interest rates could lead to an unsafe system.
Therefore in the current state of the currency
market in Vietnam, floating interest rates are not
applicable.
Monthly consensus for interest rates?
The reason for the “two-price” deposit rate in
recent times has been a result of the ceiling rates
not reflecting the market’s supply and demand
correctly. One SBV leader said that even if
banks propose and the Law on SBV 2010
allows, the SBV would still not set ceiling
interest rates.
Periodically, VNBA members should agree on
the reasonable deposit rate, while the SBV
would then help VNBA monitor the members’
implementation.
For 2011, the SBV will design and announce
the delivery of the apartment.
According to Ms. Nguyen Thi Viet Ha, Director
of this Trading Floor, these sales mainly target
real home buyers as the average value of each
apartment is VND 1.2-1.5 billion/unit with area
of 53-61,92m2.
Viglacera Offers 100 Apartments at No.1,
Thang Long Boulevard
Viglacera Land is officially selling the first 100
apartments of Viglacera office - commercial -
the phrase “National Administrative Center
located in Yen Bai, Ba Vi” was rephrased to “the
reserved land for building a number of
government agencies in 2050," the land fever
turned into a land freeze, and the land bubble
deflated with price decreases of up to 70%.
Transactions in 2010 fell significantly, which
was unavoidable by the luxury apartment sector
as investors focused on other products such as
land and residential units with higher
profitability. According to the statistics of the
real estate consultancies, real estate transactions
were 60% lower from a year earlier. The
apartment market did have its bright spot,
however, when a series of low-income housing
projects were launched and meeting the
demands of many people with real needs for
housing. The most notable was the successful
debut by Vinaconex Xuan Mai offering 324
apartments while there were over 1,000
registered eligible candidates according to the
Hanoi City People's Committee.
For the long term, the residential segment is the
market with the highest expectations because of
its characteristics such as high liquidity and
turnover, especially in areas where
infrastructure is relatively complete. In
particular, residential areas often have
commercial centers, supermarkets and other
value adding features which give them an
advantage to other products.
There are many positive signs coming into 2011
whereas this time last year, land prices in this
area were about 9-10 million/m2. Other current
land prices indicated are: The Licogi’s project
land at column 5 and 6, Hon Gai range from
VND 18-25 million/m2; Cienco 5 in Vung Dang
ranges from VND 12-15 million/m2; and Ha
Khanh A, B, C projects range from VND 8-16
million/m2.
There are also other equally exciting projects in
the area: Project Urban Ecology and Culture of
Ha Long and The Ha Long Hotel, Office &
Commercial Center by PetroVietnam Premier
Recreation (PVR) as the investor. Also, the Song
Da - Ngoc Vung Urban with an area of 39
hectares is under construction by Sudico and
scheduled for completion in 2012.
We must also give a special mention to
COLDWELL BANKER Vietnam’s exclusive
listing, The Bayview Towers by the developer
Minh Viet Investment Corporation. The project is
situated on 0.75 hectares of prime waterfront
property overlooking Ha Long Bay’s iconic
scenery, consisting of two 30-storey towers. It
COLDWELL BANKER Vietnam
Newsletter ISSUE 006
reacted by waiting for price decreases. In 2011,
the market will hardly see “price fevers” as in
2007-2008, but there will certainly be a
“transaction fever”.
“The market depends on the door of credit”
(according to Mr. Tran Duc Phuong, General
Director of Nam Tien Real Estate Co.)
Compared with the inflation rates of gold,
dollars, materials, Mr. Phuong explained that
quite a lot of real estate projects in the Southern
region have suitable prices for buyers and
investors. When buying property for the purpose
of investment or out of necessity, people need to
have capital support from banks. Last year,
banks restricted lending for real estate in
addition to setting relatively high interest rates;
both of which became hinderances for investors
wishing to participate in real estate.
The company’s survey shows that the real estate
investment needs of the people are great,
especially with the product lines having
low-average price levels such as land for
projects in Dong Nai, Binh Duong and housing
projects with low-average prices in HCM City,
etc. However, the need only increases strongly
when the people have the necessary support
from banks. Therefore, in Mr. Phuong’s opinion,
the activity of the property market in 2011 will
depend greatly on whether the door for credit
will be open or closed.
“Vibrant market in 2011, sustained in 2012”
(according to Mr. Doan Chi Thanh, Director of
Hoang Anh SG Real Estate Co.)
In 2011, the property market will thrive because
the price of real estate projects in HCM City
recently almost hit bottom with the prices of
products in their segments being adjusted in line
with actual needs of the market. The overcasting
trend shows that there will be a large demand of
housing for those with low average incomes.
Also many investment channels such as gold,
foreign currency, etc. have had more volatility
and increased prices recently, while real estate
prices seem to be stable, creating quite safe
investment opportunities with high profitability.
In 2011, the property market is expected to enter
a new growth cycle (1995 - 2002 to 2007 and
2011 and likely 2012). Real estate policies have
been adjusted and will go into practice, creating
more transparency in this market.
Source: muabannhadat
* How do you compare Vietnam today with
other countries in Asia during the same
period of development?
“It is hard to compare Vietnam’s real estate
market to other Asian markets in the same
period of development, since the cyclical
fluctuations vary greatly between regions.
However, Vietnam is still having better
development in real estate compared to many
other Asian countries. In terms of supply, Hanoi
and HCM City have rather limited supply of
modern retail spaces and housing systems.
The urbanisation process of Vietnam will still go
on, demand for housing and retail trade system
will continue to increase, and Indochina Capital
will proritize to invest in those areas.”
* What have Indochina Capital planned for
real estate this year?
“The Indochina Land group noted the increase
in house sales with total revenue of about $40
million in 2010. With projects underway, the
group has expanded operation to various areas,
including commercial real estate, office spaces,
tourist areas and serviced apartments.
In 2011, Indochina Capital would continue
focusing on projects such as Indochina Hanoi
Plaza, a complex worth $160 million and Da
Nang Hyatt Regency worth $130 million with
high quality rooms. The group expects to
complete both projects in the last six months of
2011.
In addition, the group would launch new
development projects, primarily the Saigon
South residential area in Nha Be District, HCM
City. Indochina Capital is in design phase of a
project capable of providing overall 1,000 to
1,200 apartments for middle-income earners.
Moreover, Indochina Land Holdings 3
(investment fund) has been established and
launched recently, aiming to invest in the real
estate market. The investment strategy of the
group for this fund is to focus on residential
areas in both urban and suburban locations, as
well as other complex projects in Hanoi and
HCM City.”
Source: diaoconline
interest rates.
Last year each session on the HCMC exchange
averaged 46.4 million shares changing hands
with a traded value of VND1.5 trillion. The
daily traded volume for the HCMC and Hanoi
exchanges combined averaged out at 81.5
million shares worth VND2.48 trillion.
Despite the unpredictability of local capital
flows, foreign buyers showed their highest
buying volume in the 10-year history. According
to the statistics of VIS, foreigners accounted for
net purchases of over 266 million shares worth
VND15.5 trillion in HCMC, 7.7 times and 5.7
times higher than in 2009, respectively.
Technical analysis from Au Viet predicted that
the VN-Index would stay in the 480-520 range
during the first half this year and then rally by the
third quarter to hit 600-650 at the end of this year.
VIS, on the other hand, forecasts that the
VN-Index would hit 545 points in the first four
months this year while then gaining to the 650
points level in rest of the year. The broker also
predicted that Hanoi’s index would hit 165
points by the end of 2011.
During the last session of 2010, HNX-Index rose
1.6 points to 114.24. However, over the entire
span of 2010 this index sharply declined 32%.
Source: SaigonMoney
the interest rate levels in a way that the base
interest rate will only be applicable to define
lending actions. The refinancing rate will be at
the highest level to ensure that the SBV is the
last lender able to support liquidity when
commercial banks had no other options for
lending. Special cases for small banks will
overcome the current policy’s shortcomings by
applying separate mechanisms for refinancing
interest rates according to international
practice. Public opinion has expressed that
some banks can take advantage of the SBV’s
refinancing loans and turn a profit in a way that
is not transparent.
Interest rates will decrease
Interest rates are expected to decrease due to the
fact that borrowers will no longer be able to cope
with high interest rates. Vietnam is unique in that
it is one of only few countries whose interest
rates are so high, 16-20% per annum and up to
23% for credit cards. The banks are also weary
of further pushing up rates as customers will face
lower profits and therefore may have problems
in paying back the loans. The SBV is also
determined to operate interest rates under market
principles, facilitate capital mobilization in the
economy as well as support sustainable growth.
However, several banks indicated that interest
rates would remain high in the first quarter of
2011. Once all of the macroeconomic factors
become settled in accordance with new policies,
VND deposit rates will gradually decrease by
about 0.5% each period. By the end of the third
quarter, deposit rates would be in the 12-13%
range while lending rates would be around
15-16% per annum.
Source: Vinafins
residential complex located at No. 1, Thang
Long Boulevard, Hanoi. The selling price of the
apartments is VND 37-43 million/m2, subject to
the location of the apartments.
The total construction area of the project is
13,422m2, of which the allocated residential
area is 4,953m2 and office - commercial center
area is 8,468m2. The gross residential floor area
spans 197,833m2.
The 2-Block (A and B) project comprises of
high-class residential apartment buildings with
40 storeys and 3 basements adjacent to a
6-storey commercial center.
From the 4th-40th storeys of Block A are luxury
apartments and penthouses with area of
87-336m2. Similarly, those of Block B include
luxury apartments and penthouses with area of
91-358m2.
such as positive economic indicators from 2010
including: GDP growth of 6.78%; average
incomes of $1,124; and foreign direct
investment attraction of $17.23 billion of which
the property market saw more than $7 billion.
Some of the highlight projects in 2010 included
tourism and resort complexes such as Nam Hoi
An’s investment of more than $4 billion in
Quang Nam as well as investor VinaCapital’s
joint venture with its foreign partners.
According to survey data and statistics from the
Ministry of Construction, Hanoi will have more
projects launched in 2011 including nearly
2,000 apartments to be completed and put into
use while housing demand is still very high. The
table below shows the information regarding
future housing needs in Hanoi:
2015 2020
Location Area Population Area Population
(Mil. m2) (Mil. people) (Mil. m2) (Mil. people)
Nationwide
Urban areas
1.966,6
891,8
91,5
34,3
2.408,3
1.303,8
96,4
45,0
Rural areas 1.303,8 57,2 1.104,5 51,4
also features a 3-level shopping podium and 518
residential apartments designed to maximize
living space while offering each unit with
breathtaking views of the Bay. The Bayview
Towers also aims to be one of the first in Vietnam
to receive the coveted BCA Green Mark for its
sustainable and environmentally - friendly
design. The project is
scheduled for completion in
2013 and promises to become a
prominent part of the property
market in Quang Ninh.