John Gallander, director of Savills Hanoi, talked with Viet Nam News about perspectives of real estate market this year.
|Nam Do apartment project on Ha Noi's Truong Dinh Street is on sale. VNS Photo
As an experienced property consultant, what do you predict for the future of Viet Nam's property market?
|John Gallander, director of Savills Hanoi.— VNS Photo Truong Vi
The Vietnamese property market as well as Ha Noi's property market will have a great future in the long term. However, in the short term, the imbalance between supply and demand needs to be corrected to improve overall market conditions. I am excited about the future of 2013 because the macroeconomic conditions in Viet Nam have improved dramatically. The property market is poised to improve in 2013 because the State Bank has done a good job in many problematic areas.
Firstly, inflation has decreased significantly from approximately 20% a year ago, to its current state of 8-9%. Secondly, interest rates have fallen dramatically which has encouraged more borrowing. This increased liquidity will ultimately provide buyers with more viable options.
Thirdly, the Vietnamese dong (VND) has remained steady for the past 12 months providing more stable market conditions. In terms of the commercial sector, there is more supply being delivered to the market than demand or absorption. The additional supply will result in vacancy levels increasing throughout the market in 2013. However, domestic customers are increasing their space needs as they want to improve their image with a better working environment and comply with international standards. Finally, the Vietnamese domestic stock market has improved significantly and the VN-Index is up over 30% in the past 6 months. Furthermore, I see positive trade balance for the first time for many generations in Viet Nam. In summary, all of these positive trends and conditions in the Vietnamese macroeconomy will improve the property market in the short term.
What do you think of the Government's solutions to warm up the property market? What can foreign real estate companies like Savills do to take advantage of the Government's solution package?
The Vietnamese Government should help the property market warm up with stimulus measures targeted at the demand side. The government should guarantee or subsidise loans for first time home buyers as one alternative stimulus programme.
The attraction as well as the concern of foreign investors regarding Viet Nam's property market depends on many factors such as the bad-debt situation and non performing loans (NPL's) in the banking sector. This condition has brought both challenges and opportunities to the market.
Once banks understand they need to deal with their NPL's in a practical and common sense manner, conditions will improve quickly. The economic crisis and the upcoming recovery will depend on internal economic adjustment in both policies and execution.
The Government should reduce foreign ownership restrictions to stimulate more FDI by allowing foreigners to hold "red- book" titles. At the very least, the Government should extend land lease durations from 50 years to 99 years which have been applied successfully in stimulating other countries growth, with which Viet Nam competes with for foreign investment.
In other words, Viet Nam should have a more open view about foreign ownership, bringing healthy competition within Viet Nam resulting in a speed up in growth as apposed to other countries in the region.
The Government could also consider a middle ground approach allowing foreigners to own red books in resort destination and/or condos vs landed properties. The Government should also eliminate the restriction on subleasing by foreign entities. This change will stimulate investment and improve the market.
What would be your advice for property investors this year?
At present, the property market now is at or near the bottom of the current cycle. Therefore, it is a great time for investors to enter the market if they have a medium to long-term perspective, as property values should increase over time.
Typically, in the property market, the contrarian viewpoint is very effective. It needs to be remembered that the time to buy is often when everyone is selling and when prices are at a discount. The time to sell is when everyone is buying and price's are at a premium. 2013 is the beginning of the conversion period of Viet Nam's property market to a better position for recovery. Therefore, the full recovery or adjustment may take from one to three years to create a better environment for investors.
What sector (offices, resorts, apartments) will Savills focus on this year? How is your company's annual target different from previous years? Why? Can you tell us about Savills' major projects in 2013?
Currently, we are focusing on all the major property types with a lot of attention on residential and commercial. Our residential department includes the second home market or holiday home market which is expanding rapidly in Viet Nam.
We see our portfolio being more balanced among various property types going forward. This increased balance and diversity of product offerings will benefit us with less volatility in the market which is good for our business.
In 2013, we have set targets based on the belief of the near term improvement in the property market in Viet Nam. Additionally, the vastly improved marcroeconomic factors benefit the property sector such as: sales, leasing, valuation property management, research and marketing. You can see some of our major projects in 2013 such as: Times City by Vin Group, PetroVietnam Insurance Tower, Discovery Complex by Cau Giay Service and Trading Investment, Tay Ho Residence by Handico 7, IPH by Indochina Land, Ecopark by Vihajico and many residential projects by VinaCapital. -- VNS