by Thuy Anh

Continued monetary easing by the State Bank of Viet Nam, including the recent cut in interest rates, gave the real estate market reason for cheer during the first quarter.

HCM CITY (VNS) — Continued monetary easing by the State Bank of Viet Nam, including the recent cut in interest rates, gave the real estate market reason for cheer during the first quarter.

The cut, according to CBRE Vietnam managing director Marc Townsend, increases the chances of mortgage lending to expand and gives cause for investors to move away from bank deposits and into other asset classes.

Stocks were one asset class that improved notably in the first quarter, with the HCM Stock Exchange ending the quarter up 12.5 per cent year-on-year.

"Lowering interest rates and an improving stock market gives the real estate market hope, especially residential developers who have faced the brunt of the negative sentiment which has prevailed within the market," Townsend said at a press briefing about the market in the first quarter on Wednesday.

"In past cycles we have noted how profit taking from the stock market and the availability of financing are key to driving residential sales. Whilst sentiment does remain icy, there is light at the end of the tunnel."

Though economic growth slowed in the first quarter, falling to below 5 per cent year-on-year, inflation remained low and stable at 6.6 per cent year-on-year.

The first quarter was busy for the HCM City office market with a number of significant transactions as tenants took advantage of what is seen as a market bottom. Rents remained flat or went up moderately for both grades A and B.

Grade A rental rates stood at US$31.36 per square metre at the end of the first quarter, a 1-per-cent quarter-on-quarter increase.

The vacancy rate continued its downward trend, closing the quarter at 13.1 per cent.

Grade B rents also increased in the quarter, by 3.5 per cent, ending at $18.11. The increasing rental was particularly notable given the new supply of 37,449 square metres that came into the market and caused the vacancy rate to increase modestly.

Dung Duong, senior manager of research and consulting at CBRE, said: "As predicted in the previous quarter, office rentals have temporarily reached a bottom. We expect no new Grade A or B supply until at least the first quarter of 2014, thus there is little reason to suggest any softening in rents and reason to believe some landlords' positions may strengthen."

The recalibration in rentals that has occurred has made the country's office market comparable with others in the region, thus providing multinationals with a genuine cost incentive to enter the market, consolidate, or even expand.

During the first quarter, there were a notable number of deals in the 1,000-6,000sq.m bracket, marking a notable change from the historical trend where the majority of deals were less than 1,000 square metres.

Residential market

Buyers are only interested in projects which can absolutely justify their selling price through the quality of construction, delivery, their location, and the reputation of the developer.—VNA/VNS Photo

The first quarter saw more new projects launched than in both the previous quarter and in the corresponding quarter of last year.

Notably, two of the four projects launched were in the high-end segment, according to Dung Duong, while the other two were in the affordable segment.

The projects launched in the first quarter were Happy Valley in Phu My Hung (163 units), The Prince Residence in Phu Nhuan District (277 units), Nhat Lan 3 in Binh Tan District (240 units), and Metro Apartment in District 2 (104 units).

Competitive pricing was the key selling point for developers, with the projects launched costing 10 per cent down from 12 months ago.

Commenting on the trend, Townsend said: "The transactions that have occurred in the market are reflective of the existing demand for products with the right pricing and in the right location.

"I have long been a believer that the market it not ‘over supplied,' [only] there has simply been a lot of badly positioned projects."

The majority of transactions in the quarter took place at newly launched projects. Phu My Hung's Happy Valley, for instance, sold the majority of units it brought to the market.

Prices in the luxury and high-end sectors saw a 2.2-per-cent and 1-per-cent decrease respectively from the previous quarter, whilst the affordable and mid-end segments saw pricing remain flat.

"Buyers are only interested in projects which can absolutely justify their selling price through the quality of construction, delivery, their location, and the reputation of the developer.

"We expect to see no change in these characteristics as the market moves forward." — VNS