Vietnam Property Market Struggles

September 12, 2013, 7:02 AM

Vietnam Property Market Struggles

By Nguyen Pham Muoi

HANOI — Vietnam’s property market is sluggish, reflecting a rise in inventory because of slow sales of newly built apartments Hanoi, Ho Chi Minh City and other big cities. That is the conclusion of  former Deputy Minister Dang Hung Vo of National Resources and Environment, the office responsible for land management in the country. The sluggishness coincides with some financial help from the government for low-income and other buyers to try to stimulate the market. But, property specialists say, the government incentives are too small to make a difference. And other problems – such as Vietnam’s traffic jams, high taxes, and governmental policies that discourage foreign investors – have meant that foreign buyers haven’t been rushing in to pick up property at discount prices.In July, the government unveiled financial incentives totaling VND30 trillion ($1.42 billion). Loans for home buyers of up to 10 years at annual interest rates as low as 6% are aimed at creating more buyers while encouraging housing developers to drop prices to attract them. The Ministry of Construction has also planned to provide VND5 trillion (US$235 million) to help low-income families buy houses between 2013 and 2015.

Still, the government’s intervention isn’t expected to make much of a dent in a market where various multi-trillion dong commercial and housing projects are lying idle, with unpaid bills resulting in heavy debts for numerous construction firms. Local authorities owe construction firms VND91 trillion for the works they have completed in many provinces, the government said last month.

Adding to the problems is the lack of reliable statistics about inventories of finished and unfinished properties, the size of idle land areas or sources of funds, said Mr. Vo.

In its latest property report issued last month, the Ministry of Construction said total property inventories in 56 out of 64 provinces in the country were valued at VND125 trillion (US$5.48 billion), with land accounted for 39%, high-rise condo 33% and houses 28%. Of the total 33,852 apartments awaiting buyers, 14,880 are in Ho Chi Minh City and 9,651 in Hanoi, the ministry said.

“The government has only taken a small stimulus step, because the Ministry of Construction has underestimated the property market, which is worth between VND400 trillion (US$19 billion) and VND500 trillion,” said deputy director Nguyen Van Duc of Dat Lanh Properties Ltd, which is based in Ho Chi Minh City.

The market has an oversupply of many properties, including luxury houses, and apartments larger than 70 square meters at a price of above VND20 million per square meter, which are out of touch for a majority of potential homebuyers, Mr. Duc said.

Mr. Duc blames the government for ineffective land management policies.

Although average prices for apartments and other homes have sharply fallen in the recent years, they are expected to further decrease by 30% and 50% in the coming months because of weak local demand, Mr. Duc added.

Financial difficulties have forced many local developers, including well-known ones such as Hoang Anh Gia Lai Group and Petrovietnam Group, to leave. Many others desperate to exit because they face heavy debt, lawsuits and possible imprisonment.

Chairman Doan Nguyen Duc of HAGL Group said last month that his company will seek to sell property-related assets worth more than VND2 trillion (US$95 million) in the country to reduce its debt and to raise funds for its property development in Myanmar.

As local companies are financially weak, the government needs to encourage foreign developers enter the market, Mr. Vo, who is now an independent property analyst added that, “As globalization has increasingly become a fact of life, Vietnam has to open wider and faster the domestic property market to foreign participation to attract important financial sources for the economy.”

Associate Director Su Ngoc Khuong of Savills Vietnam, which is a foreign-run real estate service provider, said there is a window of opportunity in the next six to 12 months for foreign investors, adding that Japanese and Taiwanese investors are making inquiries about buying offices, serviced apartments and hotels.

The government of Vietnam has said it will revise law to encourage foreign investment in the property market, including making it easier for foreigners  to own property. But high taxes and poor infrastructure are burdensome, property firm CB Richard Ellis said in its August market review report.

“After several years of hurt, Vietnam shows opportunity and return… But for those already committed to the country, [they] still have many battles to survive,” the property firm added.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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