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Little impact on real estate from exchange rate movements

Released at: 11:11, 28/08/2015

Little impact on real estate from exchange rate movements

CBRE report sees minimal effect on average housing prices in new projects.

by Thu Hoang

Average housing prices in Vietnam’s real estate market will not be overly affected by the current exchange rate volatility, according to a recent CBRE report.

CBRE’s experts wrote that domestic developers account for the bulk of supply in Vietnam’s residential real estate market while foreign developers account for less than 10 per cent.

Housing prices over recent years have been significantly affected by supply and demand factors rather than exchange rates.

“Projects that have completed their construction will be less affected by exchange rate volatility as the cost of imported raw materials for these projects were paid for in the past,” the report stated. “Future projects, however, with imported construction materials, will be under pressure from price increases.”

Foreign investors and developers usually have profit targets calculated in USD, so they may bear a heavy burden from sales made in VND even though the risk of exchange rate fluctuations would have been carefully considered when they developed financial plans for their projects.

According to the report, local investors’ demand for investing in real estate may increase in the time to come as property becomes seen as a popular investment channel compared to gold, securities, and bank savings, in the context of volatile gold prices, stock market fluctuations, and low interest rates.

Foreign investors may also be less affected by the devaluation of the VND in terms of their investment decisions. “Before the recent VND devaluation, Vietnam’s property market was seen as an attractive investment channel due to its higher profitability and lower purchasing price compared with neighboring countries,” the report added.

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