Inventories have been falling over the last few years but many projects still have significant numbers of vacant units.
Real estate inventories have fallen sharply but are still considered by industry analysts to be quite high. Together with the need to reduce overall inventories it is also necessary to increase supply in low-end housing to meet the high demand among urban residents.
According to figures from the Ministry of Construction (MoC), as at November 20 the total value of the real estate inventory was about VND53.24 trillion ($2.37 billion), VND3.04 trillion ($135.2 million) lower than on October 20, VND41.21 trillion ($1.83 billion) lower than in December 2013, and VND75.3 trillion ($3.35 billion) lower than in the first quarter of 2013.
Big money buried
The apartment inventory stands at 8,817 units, worth VND13.2 trillion ($587.5 million), while low-rise housing totals 7,787 units worth VND13.9 trillion ($619.2 million), housing land lots 6,336,109 sq m worth VND21.6 trillion ($962.5 million), and commercial land lots 1,625,471 sq m worth VND4.47 trillion ($199.1 million).
In Hanoi, as at November 20, the total value of the real estate inventory was VND7.02 trillion ($312.6 million), a VND274 billion ($12.1 million) decline compared to October 20, VND10.03 trillion ($446.3 million) lower than in the first quarter of 2013, and down VND5.94 trillion ($264.4 million) against December 2013.
In particular, the apartment inventory is 436 units worth VND487 billion ($21.6 million) and low-rise housing 2,226 units worth VND6.5 trillion ($290.9 million).
In Ho Chi Minh City, meanwhile, as at November 20 the total value of the real estate inventory was VND10.54 trillion ($469 million), down VND256 billion ($11.39 million) compared with October 20, VND18.2 trillion ($809.7 million) against the first quarter of 2013, and VND6.92 trillion ($308.1 million) against December 2013.
The city’s apartment inventory stands at 4,435 units worth VND7.55 trillion ($335.9 million) and low-rise housing 483 units worth VND1.35 trillion ($290.9 million).
According to many experts, however, these figures do not accurately reflect the actual property inventory. There are many projects with inventory not reported to local authorities. Other projects have mobilized part of their capital investment or implemented some level of site clearance then delayed construction. The actual inventory is therefore much higher than the figures reported by MoC.
In Hanoi the villa and townhouse inventory is quite large, according to Mr. Bui Dinh Thanh, Head of the Business Department at Vietdutch Property Co., Ltd. Most have high prices so liquidity is rather low.
The owners of these villas and townhouses are mostly speculators. They took out bank loans to buy the properties and before the real estate bubble were making a profit in the market. It is quite different now, however, as investors must have strong financial resources and a sound knowledge of the performance of the real estate market if they hope to be profitable.
The inventory of apartments for sale is not high, especially at projects where developers have managed their capital investment well. At this point of time the real estate market shows clear signs of recovery. Developers with good financial resources and experience and with the capacity to develop projects that meet the stringent requirements of customers, especially green projects, have been very successful.
To address the high inventory in projects that don’t meet market demand, such as large apartments located far from the CBD and with incomplete infrastructure, cooperation is needed between State agencies and developers to build transport infrastructure and technical infrastructure to attract owner-occupiers.
Stable financial policies to support the market are also needed, such as measures in resolving inventories, maintaining the VND30 trillion housing credit support package ($1.34 billion) and other financial packages to help people in need of housing. Policies on allowing foreigners to buy houses in Vietnam should also be loosened further.
New development cycle
Vietnam’s real estate market is entering in new cycle of development with positive changes seen in terms of liquidity and policy, according to Mr. Tran Ngoc Quang, General Secretary of the Vietnam Real Estate Association, and continues to grow thanks to favorable macro-economic factors.
There are also a high number of newly-established enterprises in the sector. “There are concerns about the capacity of Vietnam’s real estate developers in developing projects as their capacity remains modest,” Mr. Quang said. Enterprises must have their own business strategies, adopt new thinking and vision, and continuously improve their product quality to find success.
According to local authorities, to reduce the real estate inventory and meet the housing demand among urban residents, leaders of localities must continue to monitor urban area development projects and under-construction housing projects. Projects could be divided into those allowed to continue construction and those that must cease construction or adjust their structure to meet actual demand in the market.
Further research is needed, as is the creation of non-bank financial institutions such as housing funds to support homebuyers and real estate investment funds to provide mid- and long-term capital flows to housing projects.
Local authorities and developers should also better determine the feasibility of real estate projects when granting investment licenses, selecting locations for projects.
Projects unable to connect with general infrastructure or that do not provide accompanying facilities should be stopped. Housing products need to be diversified in terms of area and price to meet actual demand.
The proportion of high-rise apartments and rental housing should be increased, with strict monitoring of developers’ commitments in completing construction, technical infrastructure, and facilities.