| Property investors expect little for now |
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(Listed May 15, 2008) |
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 Real estate investors are not holding their breath for big returns this year as the government’s tighter credit policies have pushed the property market into a slump.
Property traders who once thrived in Vietnam’s hottest market have set more humble targets until the new real estate freeze thaws.
Though property demand looks set to climb in the long term, the inability to buy real estate on loans has cut short term demand as speculators dump property to meet higher interest rates.
Eden Joint Stock Company, which scooped up billions of dong in profit from its real estate investments last year, is not optimistic about the property market’s short term future.
Eden’ 2008 revenue target of VND105 billion (US$6.5 million) is a modest 12 percent increase on last year, nowhere near the kind of growth it experienced in 2007.
And the company’s shareholders have said even this goal would be difficult to meet.
Sleep after the storm
Last year, many joint stock companies raked in major profits trading real estate even though the field was not their specialty.
Eden Joint Stock, a financial service provider as its core operation, is a good example.
Its eight real estate investments last year earned it VND28 billion ($1.73 million) in pre-tax profits – more than four times as much as the profits from its key line of business.
Property potentials were so great that Eden has since established a real estate company to take charge of its property investments.
No. 8 Construction and Investment Joint Stock Company’s President Huynh Huu Phuoc said real estate also proved to be a fertile feeding ground for his company last year.
Various new urban, high-rise, and apartment projects added VND47 billion ($2.91 million) to the company’s profits, far surpassing the firm’s expectations.
Phuoc said things would not be so easy this year.
Since the government tightened up on credit – especially speculative borrowing – as part of a larger effort to cool the overheating economy, property sales and prices have dropped.
In HCMC, prices have fallen by as much as 40 percent.
Units at the Thanh My Loi residential project in District 2 are now sold at only VND25-30 million ($1,548-1,858) per square meter, down from 35-40 million ($2,167-2,477) just last December.
HCMC’s 500 property projects currently under construction may lose some tens of trillions of dong to declining prices, real estate experts have said.
Experts blame the current slump on small-scale and speculative investors who are dumping properties to avoid losses as banks have increased interest rates on loans.
These properties have become both cheap and undesirable.
But Vinacapital was quoted by Bloomberg as saying the downturn would be short-term as demand for property in Vietnam, especially hotels, offices, retail space and land for residential developments still far exceeds supply.
Phuoc from No. 8 Construction and Investment agreed.
He said despite tight monetary measures, his company would continue to invest in high-end apartments, industrial zones, commercial complexes and rental office this year.
Specifically, Phuoc said No. 8 would build 10,000 new apartments for low-and-middle-income buyers over the next five years.
“The demand for this sector is particularly great,” he said.
“You don’t run the risk of losing here.”
Reported by Tran Thanh Binh - Thanh Nien News
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