Ms. Nguyen Hoai An, Senior Manager at CBRE Vietnam, spoke with VET about price increases for condominiums for sale and their impact on the property market's performance.
|Ms. Nguyen Hoai An|
What do you think about the price increases in condominiums for sale recently in both the primary market and the secondary market?
Price increases didn’t happen across the board. They were only seen at certain developments of reputable developers and with good infrastructure, and increased incrementally rather than in a sharp surge. This means that even developers with good track records are cautious in their pricing strategy, fully aware of the actual affordability of buyers.
In Hanoi there are certain projects in the affordable segment that really draw a good crowd and where there has been an opportunity for developers to increase their prices. Questions remain, however, over the sustainability of such increases. Certain high-end condominium projects also managed to increase their prices in their later phases, as these later phases benefit from previously developed facilities as well as a relatively established residence community.
How have price increases impacted on buyers’ psychology and the market’s performance in general?
Buyers have become much savvier these days and collect enough information on the project itself and compare it against other options before making a purchase decision. With so many options available, both current and upcoming, price increases may not be the best competitive strategy, unless the development itself possesses unique competitive edges such as location and concept. For that reason, price increases may have a counter effect on sales performance, especially if the project has multiple competitors with similar offerings but more competitive prices.
Developers now operate in an increasingly competitive playground where their track record can translate into long-term sales performance and success in the long run, which means any price increases need to be linked to market factors including supply and demand and the interest rate environment, rather than through arbitrary decisions.
Conditions on loans for the property market have been loosened somewhat and some insiders wonder about a property bubble emerging. What are your thoughts on this?
Credit growth in 2014 was 12.62 per cent and 1.25 per cent for the first three months of this year as at March 20. This is a healthy if not modest level. In addition, housing loan interest rates in Vietnam of about 10 per cent per annum are still higher than in other neighboring countries such as Singapore and Thailand, which deters buyers from taking out a mortgage. As long as credit remains under control, which it currently is, a bubble is unlikely. There may, however, potentially be an issue of overbuilding in certain developing areas in both Hanoi and Ho Chi Minh City, where supply is released at a quicker pace than what the market can absorb.