Vietnam property market imploding

by -
2004

Prices for apartments and offices in Vietnam are in free fall, clearly showing that a recent buying spree was far from being sustainable.

According to property broker Colliers International, the average selling price of luxury apartments has plunged 40 per cent, mid-end apartments’ average selling prices fell 30 per cent in 2012, and the average selling price of low-end apartments dropped 27 per cent in both Hanoi and Ho Chi Minh City.

Office and retail rents have fallen between 20 and 40 per cent, according to property firm CBRE, and may decline by as much as another 15 per cent in the next three years. Some office towers are half-empty. Almost 16 per cent of available Hanoi retail space was vacant at the end of the third quarter of 2012, according to CBRE, with most free space to be found in the capital’s shopping centers.

Vietnam has experienced a property boom between 2007 and 2009, with a great number of residential and property projects coming on the market. However, the country’s economy and foreign investment slowed over the past years, banks are struggling with an increase in bad debts, and unfinished property projects, empty offices and lower rents risk adding to the pile of non-performing loans.

One out of every ten loans in the banking system has stopped paying, according to the central bank, while rating agency Fitch believes that the percentage of bad loans might be much higher.  The official total value of outstanding real estate loans in Vietnam currently stands at $8.5 billion.

After a lending boom that fueled the fastest inflation in Asia, Vietnam’s central bank raised interest rates in 2010 and 2011 and restricted lending. Among the casualties were many of the nation’s inefficient state-owned enterprises, which had diverted cash to property developments.

Many residential projects have stalled in mid-construction, and many property developers have delayed launching projects.

Statistics released by Colliers estimate that there are a combined total of nearly 60,000 unsold properties in Hanoi and Ho Chi Min, as overseas property investors wait for house prices, which have been falling for almost three years, to reach rock bottom.

 



Support ASEAN news

Investvine has been a consistent voice in ASEAN news for more than a decade. From breaking news to exclusive interviews with key ASEAN leaders, we have brought you factual and engaging reports – the stories that matter, free of charge.

Like many news organisations, we are striving to survive in an age of reduced advertising and biased journalism. Our mission is to rise above today’s challenges and chart tomorrow’s world with clear, dependable reporting.

Support us now with a donation of your choosing. Your contribution will help us shine a light on important ASEAN stories, reach more people and lift the manifold voices of this dynamic, influential region.

$
Personal Info

Donation Total: $10.00

 

 

Prices for apartments and offices in Vietnam are in free fall, clearly showing that a recent buying spree was far from being sustainable. According to property broker Colliers International, the average selling price of luxury apartments has plunged 40 per cent, mid-end apartments’ average selling prices fell 30 per cent in 2012, and the average selling price of low-end apartments dropped 27 per cent in both Hanoi and Ho Chi Minh City. Office and retail rents have fallen between 20 and 40 per cent, according to property firm CBRE, and may decline by as much as another 15 per cent...

Prices for apartments and offices in Vietnam are in free fall, clearly showing that a recent buying spree was far from being sustainable.

According to property broker Colliers International, the average selling price of luxury apartments has plunged 40 per cent, mid-end apartments’ average selling prices fell 30 per cent in 2012, and the average selling price of low-end apartments dropped 27 per cent in both Hanoi and Ho Chi Minh City.

Office and retail rents have fallen between 20 and 40 per cent, according to property firm CBRE, and may decline by as much as another 15 per cent in the next three years. Some office towers are half-empty. Almost 16 per cent of available Hanoi retail space was vacant at the end of the third quarter of 2012, according to CBRE, with most free space to be found in the capital’s shopping centers.

Vietnam has experienced a property boom between 2007 and 2009, with a great number of residential and property projects coming on the market. However, the country’s economy and foreign investment slowed over the past years, banks are struggling with an increase in bad debts, and unfinished property projects, empty offices and lower rents risk adding to the pile of non-performing loans.

One out of every ten loans in the banking system has stopped paying, according to the central bank, while rating agency Fitch believes that the percentage of bad loans might be much higher.  The official total value of outstanding real estate loans in Vietnam currently stands at $8.5 billion.

After a lending boom that fueled the fastest inflation in Asia, Vietnam’s central bank raised interest rates in 2010 and 2011 and restricted lending. Among the casualties were many of the nation’s inefficient state-owned enterprises, which had diverted cash to property developments.

Many residential projects have stalled in mid-construction, and many property developers have delayed launching projects.

Statistics released by Colliers estimate that there are a combined total of nearly 60,000 unsold properties in Hanoi and Ho Chi Min, as overseas property investors wait for house prices, which have been falling for almost three years, to reach rock bottom.

 



Support ASEAN news

Investvine has been a consistent voice in ASEAN news for more than a decade. From breaking news to exclusive interviews with key ASEAN leaders, we have brought you factual and engaging reports – the stories that matter, free of charge.

Like many news organisations, we are striving to survive in an age of reduced advertising and biased journalism. Our mission is to rise above today’s challenges and chart tomorrow’s world with clear, dependable reporting.

Support us now with a donation of your choosing. Your contribution will help us shine a light on important ASEAN stories, reach more people and lift the manifold voices of this dynamic, influential region.

$
Personal Info

Donation Total: $10.00

 

 

2 COMMENTS

  1. Why has FDI slowed as it has increased in other ASEAN countries? Is it based on regulation and transparency. NPLs at 10% is extremely high not to mention that this number might be higher. Will the banks need a bailout or do they have the financial muscle to write them off?

  2. That is scary for Vietnam! Now the investors only look at Vietnam as a cheap labour country which they only target to build factory and use the benefit of cheap operating cost there. But for the skilled workers, the investment shifts more to Philippines, Indonesia and Thailand. Vietnam will need to keep up by improving its labour skills.

Leave a Reply