Only 1,500 condominiums were sold in Hanoi in the first quarter, according to CBRE. While that’s a fivefold increase from the 279 sold in the same period two years ago, it’s still down from the peak in 2009, when more than 15,000 units were sold in the capital city. In Ho Chi Minh City, first-quarter sales more than tripled to 2,263. That’s compared to a peak of 13,000 condos sold in Ho Chi Minh City in 2010.
“We’ve still got issues that are holding us back,” Richard Leech, Hanoi-based executive director of CBRE, said in an interview yesterday. “Although we have had economic stability, there is a lack of confidence, a fear that interest rates are going back up.”
First-quarter home sales reflect difficulties in a property market where entire subdivisions on city outskirts remain unfinished and empty, Leech said. The economy continues to be stymied by bad debt at banks, of which a third were tied to soured property loans at the end of 2012. Lenders are putting together a loan package to stimulate the property market and policy makers cut interest rates last month to bolster growth.
The central bank last May approved 30 trillion dong ($1.4 billion) of financing for five banks to use for low-interest home loans, yet few homebuyers have participated in the program, Leech said. Last month, a group of banks including BIDV Securities JSC, Agribank Securities JSC, Bank for Foreign Trade of Vietnam JSC and Vietnam Bank for Construction announced a plan to offer a total of 50 trillion dong for property loans, according to Vietnam News.
The World Bank estimates the economy will grow 5.4 percent this year, a seventh straight year of growth below 7 percent. The central bank in March cut its policy rates and said it’s stepping up efforts to create more favorable conditions for foreign investors, including a plan to auction bad-debt assets of banks. Policy makers are also weighing a proposal that would make it easier for foreigners to buy homes in the country.
Declining home values hurt Vietnamese sense of wealth, Adam McCarty, Hanoi-based chief economist at Mekong Economics, said in a phone interview. When that drops, people reduce their spending, which ripples across the economy, he said.
“Most people’s wealth is tied up in real estate,” McCarty said. “They are seeing their wealth go down on paper about 30 percent in the last few years. A lot of people have debts. There is a lot of stagnation.”
Just a few years ago, ordinary Vietnamese were “gambling” on apartments, putting down deposits with plans to resell the units in a month or two, he said. When the market slumped, they could not sell the homes, McCarty added.
Some pockets of the housing market are seeing improvement, particularly vacation properties along the central coast and upscale condominiums in the centers of Hanoi and Ho Chi Minh City, Leech said. Foreign investors are showing more confidence in Vietnam’s market than domestic buyers, he added.
“The confidence is with the foreigners,” he said. “Foreign developers are sniffing around.”
Prices for condominiums in Hanoi and Ho Chi Minh City were generally little changed in the first quarter with no recovery expected this year, Leech said.
Still, Vietnam will be better off in the long-term with a slow recovery, he said.
“I like this slow return which slowly builds confidence,” Leech said. “This is much more sustainable.”
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