THRIVING REAL ESTATE MARKET

Real estate markets thriving

The housing price in Hanoi increased in 2015, along with an increase of the liquidity. According to the survey report, the real estate market in the fourth quarter of 2015, announced by CBRE at the beginning of 2016, there were 28,300 apartments on sales in 2015, an increase of 70 per cent compared with 2014. The number of transactions has reached new record, compared to 2009, with 15,000 apartments sold and 24,000 partments opened for sales, higher than the record number of units opened for sales in 2011.

Unlike previous years, when the market turned down, the lower price apartments took advantages; in 2015, the segment of luxury apartments boosted in both of volume and transactions. The number of luxury apartment accounted for 28 per cent of the total offering of new units, higher than the peak of 21 per cent in year 2011 in the open sale time. Many investors that boldly launched the projects previously, have repositioned their segments and implemented new projects.
 
The segment of luxury apartments have been returned spectacularly, but the affordable and intermediate segment accounts for a high proportion of the total annual transaction volume due to a reasonable price, targeting to the majority of home buyers with real needs for living. So, the market liquidity of both of two segments is high. Mr Richard Leech, CBRE Executive Director said only in quarter 3 of 2015, in Hanoi, the real estate transaction volume was more than doubled compared with the total transactions of two previous quarters.
 
Along with the liquidity, the open sale price of new projects has increased by 3-5 per cent compared with the previous year and the price of the luxury apartments has increased by 5-7 per cent in the first open sale days. Secondary market has recorded a slight increase of 0.3 per cent Quarter on Quarter and 1.1 per cent Year on Year.
 
Active transactions with inventories are being consumed; some projects have difference of a hundred millions VND, showing a significant warming of the market.
 
The housing price of Ho Chi Minh City is relatively stable; the price of the intermediate housing segment has slightly increased, according to the Association of Real Estate Vietnam (VNREA). Particularly, in November, 2015, the country's largest city had about 1,600 real estate transactions made successfully, an increase of 23 per cent compared to the same time 2014. Thus, the volume of transactions in November, 2015 were about 24,300, an increase of 92 per cent YoY.
 
Attracting domestic and foreign capital

Real estate has prospered due to foreign investment flows. According to the Foreign Investment Agency, Ministry of Planning and Investment, as of November 20, 2015, there were 1,855 new projects granted for investment certificates, with a total registered capital of US$13.55 billion, up 1.1 per cent over the same period in 2014. There are 692 registered projects, of which the total registered capital has increased by VND6.66 billion, up 70.1 per cent over the same period in 2014. Generally, in November, 2015, the total newly registered and additional capitals have been US$20.22 billion, up 16.7 per cent over the same period in 2014.
 
The cash flow will naturally shift to the profitable investment projects and now it focuses on real estate. The market has recorded many domestic projects implemented and a number of projects have been alive again. The market has experienced a long hard time with high inventory and falling prices and it has recovered and prospered in 2015; however, it needs more time to be stable.

Mr Nguyen Tran Nam, Chairman of the Vietnam Association of Real Estate expected that basically, the market will grow steadily in 2016.
 
The economy of 2016 is growing steadily. The real estate market is gradually exposed one of stable and effective investment channels, among all traditional investment channels such as stocks and gold. And more importantly, the housing needs of the people are still very large, especially in the big cities like Hanoi and Ho Chi Minh City. Meanwhile, the existing supply of the city is quite modest.

Cash flows will increasingly accelerate, with the recovery of the market. However, the rapid rise of the real estate in the luxury apartment segment is repeating the scenario of the market crash last time when money were poured into the premium segment while other segments to meet the real needs of the people and their ability were ignored. In the long term, affordable housing remains the segment with the largest customer base and has the highest housing needs. However it seems that businesses have gradually forgotten lesson premium real estate previously only seen big profits from this segment.

Source: VCCI