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Vietnam's market 'look but don't touch.'
Jul 02, 2012
An antiquated market: Vietnam's potential buyers 'look but don't touch.' CBRE reports that it is just a matter of time before transactional volumes increase.
Residential buyers in Vietnam are beginning to explore the market due to improved macroeconomic fundamentals, reported CBRE.
Enquiries for residential purchases have been increasing, however, the situation seems to be a case of a ‘you can look, but you can’t touch’ approach from the potential buyers-market. CBRE reported that, to date, there has been no wide-scale increase in transaction volumes.
Managing director of CBRE Vietnam, Mr Marc Townsend said: “Obviously buying a residential property, be it for investment or personal occupation, is a huge decision and financial commitment – as such we are now seeing buyers looking, but not touching.
“We expect this increase in enquiries to translate to an uptick in sale around the turn of the end of the year.”
Making continuous progress in Q2 of 2012, Vietnam’s economy is slowly recovering from its battle against inflation. The provisional y-o-y inflation at the end of June was recorded at 6.3 per cent (well below the psychologically important figure of 10 per cent).
Commenting on this, Adam Bury, senior manager of Research and Consulting at CBRE Vietnam said: “It’s a relief to see that inflation is finally below the 10 per cent benchmark, over which is considered entirely unsustainable.”
Vietnam has also witnessed stabilisation of its currency with a growth of exports to 24.1 per cent y-o-y, as of the end of May. This resulted in an improvement in its trade deficit to US$700 million – a decrease of 58 per cent, y-o-y.
The state bank of Vietnam has acted quickly and in accordance with the economy to ease its monetary policy through three rate cuts.
Mr Bury said: “Though the three rate cuts have caught some by surprise in terms of their aggressiveness, given the slowdown in growth that has been evidenced and the contraction in economies globally, it is not an unreasonable policy.”
Despite relatively strong economic fundamentals, it is noted by CBRE that the residential real estate market is yet to see a notable increase in transactional volumes. CBRE highlighted that although transactional volumes will increase, this will not take place overnight or in a single quarter.
In an analysis of previous trends, Mr Bury speculated: “Historic performance is clearly no indicator of future performance, but if the market was to perform as it did in 2009 then we can expect at least a two quarter lag between inflation and interest rates dipping, and residential sales velocities increasing.”
In a restraint on optimism, Bury noted that inflation in the most recent cycle had not peaked at the same levels in 2008 and that GDP growth rate whilst slowing, is presently above that in 2009.
In regard to residential pricing, CBRE claim that it is apparent that the stand-off previously identified between developers and purchasers continues. Prices on the primary market remain relatively flat. In the secondary market, prices across the major sectors have softened slightly. High-end, mid-end and affordable sectors have seen q-o-q prices drops of around 1 per cent. The luxury sector saw no notable movement on a q-o-q basis, reported CBRE Vietnam. Through their research, CBRE suggested that the majority of developers believe that buyers will soon return to the market and, for this reason, further price reductions were therefore unnecessary.
Managing director, Marc Townsend concluded: “Whilst we are not out of the woods yet, we believe we are now heading in the right direction.
“Macroeconomic fundamentals are moving in the direction that the markets want, whilst unit pricing appears to be stabilising. Both CBRE and our clients have spent money on sales events in the second quarter and we have been positively encouraged by the turnout.
“It seems that buyers have finally stopped hiding and are now scouring the opportunities that present themselves.”