Thursday, February 18, 2016

Tightened credit expected to stop real estate bubble

Loans pouring into the real estate sector are expected to be tightened given that the sector is said to be experiencing robust growth.

A view of Linh Dam New Urban Area. Loans pouring into the real estate sector are expected to be tightened. - VNS Photo Doan Tung
In a draft document issued by the State Bank of Viet Nam circulated for the opinion of financial institutions, the risk index of receivable lending for real estate and securities might be raised from 150 per cent (the lowest level) as stipulated in Circular No 36, to 250 per cent.
Maximum ratio of short-term funds used for medium and long term loans might be adjusted from 60 per cent to 40 per cent.
The Ministry of Construction's Department of Housing and Real Estate Market Management reported that as of November 2015, outstanding loans invested in the market was up to VND375 trillion (US$16.67 billion), a surge of 20 per cent compared to the figure of December 2014. This is the result of the Circular No 36 which was in effect from February 1, 2015.
Three activities which have the highest rate of increase in loans are, buying the right to use land with 36.3 per cent, building new urban areas with 10.7 per cent, and investing in other real estate businesses at 11.2 per cent.
The proposed amendments imply the central bank's concern about the overheating of the real estate sector, according to a report of the Ho Chi Minh City Securities Company.
The new rules, if applied, would have a negative impact on developers such as Novaland, Vingroup, Dat Xanh, and Nam Long as well as their customers, it said.
Lenders that are major players in the mortgage market, such as ACB, Sacombank and Techcombank, would also be affected, it said.
This change would not affect families and individuals who buy houses to live under the scheme of pay-by-instalment.
Previously, experts also raised concerns over the real estate "bubble" which might occur in the future if the lending for property investments was not controlled.
Expert Nguyen Tri Hieu told news website ttvn.vn that the warm-up of the real estate market could help deal with bad debts, but in fact, the market was still facing difficulties as the volume of inventories was still high.
Therefore, commercial banks should not only speed up the lending, but also need to strictly supervise the quality of loans as well as the sources of debt servicing, he said.
It is the time for the central bank to tighten credit in the real estate market, he stressed, while adding that property businesses should prepare financial resources themselves to avoid over-reliance on the banking system.

Kevin Vu - Kevinvuproperty.com

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Connectivity to Ha Long benefits Halong Marina

The development of infrastructure has improved connectivity to Ha Long, generating greater interest in properties available for sale in Halong Marina Urban Area.

A model of Green Bay Village in Halong Marina Urban Area. - File Photo
With improved infrastructure and tourism potential, Ha Long City has arisen as an attractive destination for both domestic and foreign investors, who poured billions of dollars into high-profile projects to enhance the quality of life. Halong Marina Urban Area is one example of this successful investment.
Halong Marina is the flagship project of the multi-sector BIM Group. Covering 248ha along a 3.8km stretch of coastline on Ha Long Beach, Halong Marina has contributed to changing the face of the tourist city and improving the quality of life for the local residents with its line-up of projects.
Today, Halong Marina is home to thousands of people and is hailed as an enchanting destination for tourists.
Remarkable projects under the Halong Marina umbrella include the Green Bay Apartment Building, Coral Townhouses, Halong Marine Plaza Shop House and Little Vietnam, as well as Lotus Residents, Green Bay Village and Halong Marine Plaza with a cinema, food court, shopping mall and entertainment area like T-Clb and tiNi World.
An overview of Halong Marina Urban Area in Ha Long City. - File Photo
As the first standard urban area in the northern province of Quang Ninh, Halong Marina has ensured a green living space for its residents, providing fresh air, good connectivity, a friendly community and high-quality amenities, as well as the ideal environment for children.
Halong Marina is also an attractive destination for investments in developing restaurants, hotels, hospitals and financial centres, as well as schools.
Syrena Viet Nam, a member of BIM Group, specialising in property development, said the diversification of premium housing products with an excellent living environment and education facilities had helped draw buyers not only from Quang Ninh Province but also from Ha Noi, Hai Phong, Hai Duong and other neighbouring provinces, especially since the development of the freeway made connectivity to Ha Long much easier.
In an effort to improve the living environment in Halong Marina, Syrena Viet Nam will join hands with KinderWorld Education Group to develop schools offering preschool to university education in the urban area.
In the first phase, an international kindergarten and a teaching research centre will be built and will become operational in August 2016.

Kevin Vu - Kevinvuproperty.com

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Tuesday, February 16, 2016

Property remains hot topic in Vietnam

Though there is no sign yet of the price "fever" that periodically marks the Vietnamese property market or a bubble, the market remains a hot topic for analysts and the media.

In discussions, most experts say the market has performed impressively in recent months, with figures showing that a strong recovery has set in after a long freeze. But they also warn there are distinct signs of risk, especially bank credit-related.

The Government seems to be in concurrence. In its Decision No.01/NQ-CP it seeks to severely curtail lending to high-risk sectors, in which it has included property.

State Bank of Vietnam Deputy Governor Nguyen Phuoc Thanh told a recent meeting with HCM City authorities that the central bank would restrict property-related loans this year, revealing that though a majority of loans went into funding production and business activities last year, many banks had lent too much to the real estate sector.
The housing market started recovering in late 2014. Last year the recovery was clearly reflected in the rising number of successful transactions and new projects, plunging inventories and easier credit.
According to a report by property services provider CB Richard Ellis (CBRE) Vietnam last year, in Hanoi, housing transactions hit a record 21,100, surpassing the 2009 number.

High-end apartments accounted for 28% compared to 21% in 2009.

The market also witnessed a rise in the number of long-delayed projects that was revived.

Last year also saw a firm recovery in HCM City with numerous launches, positive sales volumes and higher prices, especially for mid- to high-end properties.

More than 41,900 units in 78 apartment projects were launched, mostly in the east (47%) and south (27%) of the city, an increase of 122% over the previous year.

Overall, market sentiments remained positive through the year as 2015 ended with record annual sales – an estimated 36,160 units or up 98% year-on-year.

The strong recovery is attributed to several factors, including the 0.63% inflation last year, the lowest rate since 2001 and way below the average of 5% in recent years.

The low inflation supported a growth in consumption and investment, including in housing, which was also helped by the low mortgage rates.

But the decisive factor was probably banks' huge lending to both property developers and buyers.

In reality, the majority of property developers lack funds while the sector requires large medium- and long-term funds and there are few sources of funding for real estate firms.

Consequently, they rely completely on three main sources – owners' equity, buyers' money, and bank loans.

Besides, with most middle-class individual buyers dependent on bank loans to buy a house, lending by banks is always the key to the development of the property market.

As a result, credit to the housing sector grew 14.59% last year and 80% from three years ago to 360 trillion VND, according to the State Bank of Vietnam.

In fact, of the total outstanding credit, loans for property development and mortgages account for 20%, and many banks are still expanding lending programmes targeted at real estate.

Indeed, overall credit growth reached 18% last year, higher than the rate in 2011-14.

The experts express fears that the rapid growth of the housing market and credit poses threats of a bubble and a rise in bad debts just like a few years ago. While the real estate market recovered rather strongly last year and might continue to grow this year, the recovery is not really on a firm footing yet, they warn.

They also warn that the luxury apartment segment is experiencing oversupply.

But the supply of social housing and small and medium-sized apartments, which is where the real demand is, is limited, they say.

In HCM City, for instance, dozens of high-end apartment projects are being marketed despite the modest demand. On the other hand, only 6,000 apartments are available for low-income earners.

It seems that developers are focusing on high-end products with an eye on the expected foreign investment wave following the country's accession to the TPP while ignoring low-income earners, who have huge demand for housing.

Many believe the TPP is not a magic wand that will change the market immediately.

Another big challenge facing the market is credit-related.

According to the HCM City Real Estate Association, secondary market investors now account for 15%, up three-fold from 2014. They mainly focus on the high-end segment, buying in and selling quickly to profit from price differences.

The experts warn if the speculation is not checked, instability and a possible bubble loom.

But things are likely to remain stable this year if 50% of the money flowing into the secondary market comes from speculators' own pocket, they say.

But 70-80% of the money comes from banks and other sources of credit, often at very high interest rates, and this poses a big threat of bad debts.

Faced with this situation, the central bank has announced it will closely monitor property and long-term loans this year to safeguard the quality of credit growth.

The experts concur that it is important to tighten oversight to prevent overheating, which will cause a property bubble, especially by the banking sector over lending to the property sector.

Kevin Vu - Kevinvuproperty.com

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Strong growth expected in resort market this year

The resort market in Viet Nam will see feverish investment this year due to its great potential, according to experts.

The SeaLink City resort in the south-central province of Binh Thuan. Viet Nam's resort market is expected to see strong investment this year.-VNA/VNS Photo Thanh Ha
Nguyen Tran Nam, chairman of Viet Nam Real Estate Association, said the local economy has gained stability and growth in 2015, while the income of locals has also increased. Therefore, there is a demand among the people to own a property, which includes a resort product.
Meanwhile, the local market has launched many resort projects with large scale, synchronous infrastructure and reasonable selling prices, so the projects have attracted numerous local buyers, he said.
Development of the resort market in 2014 and 2015 was to kick-start a new development period in the local resort market because Viet Nam has many favourable natural, social and cultural conditions to develop the market, including nice beaches, a long coast and higher income, Nguyen Nam Son, chairman of Tanzanite International said. Tanzanite is an international real estate development company developing the Hamptons Ho Tram, a luxury resort development in Ho Tram, Viet Nam.
Meanwhile, a resort has become a new property product on the local market, and as the income of the Vietnamese increases so does their demand for tourism, he said. Those factors are favourable for the domestic resort market and ensure strong development in the next five to ten years.
Ngo Quoc Dung, deputy general director of HB Management, working for the development of New Hoi An City project, said Viet Nam is one of the countries with a high number holidays with about 138 days off per year, accounting for 40 per cent of total days in a year. Therefore, the local people need at least 690 million nights for accommodation each year.
In addition, Viet Nam attracts about seven million foreign visitors with high demand on resort products and high expenditure in tours, he said.
"Those are reasons of strong development of the local resort market in the future, and we will have no worries about lack of demand for resorts," Dung said.
Do Thu Hang, head of research and consultancy at Savills Viet Nam's Ha Noi branch, agreed that the demand of locals for tourism has increased recently.
"At present, there is a demand from the Vietnamese any time of the year and not just in the summer or the Tet festival," she said.
"High demand and stability of the local economy, as well as an increase in the confidence of buyers, will support the local resort market in developing further in the future because it is in the first stages of development. Therefore, the local resort market will continue positive development this year."

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Singaporeans investors show strong interest in vacation homes in Vietnam

Singaporeans real estate companies and investors have increasingly been showing interest in investing in vacation real estate projects in Vietnam.
On January 30 and 31, representatives of more than 200 real estate companies from Singapore as well as many investors joined the conference at InterContinental Singapore where Sun Group  showcased its projects in Danang and Phu Quoc.
Leong Boon Hoe, managing director of CBRE Singapore, explained that as of now the price of Vietnamese real estate in the mid- and high-end segments were lower than that in Singapore. 
Specifically, a 300 square-metre villa in Sentosa Singapore is about $12.6-$14 million, and a three-bedroom apartment is about $500,000-$840,000. Meanwhile a similar villa at Premier Village Phu Quoc Resort, Premier Village Danang Resort, Premier Residences Phu Quoc Emeral Bay is about $1-2 million, one at InterContinental Danang Sun Peninsula Resort is about $3.8-$6.5 million while an apartment in Sun Group’s projects is about $150,000-$1 million.
“Singaporeans travel frequently to destinations in the Southeast Asia. They rent apartments at $20,000 per month to live in. so they are ready to pay $15 million town a vacation villa,” said Felicia Ang, executive director of Savills Singapore.
With vacation villas in Vietnam being cheaper compared to those anywhere else, and the potential rise in the price, the number of Singaporean investors being interested in vacation real estate in Vietnam has been on an increase recently. However, according to Ang, only projects with prestigious developers that have been recognised worldwide can attract Singaporean investors.
That’s why Sun Group’s projects have been receiving attention from Singaporean investors, as Sun Group’s InterContinental Danang Sun Peninsula Resort has recently, for the second consecutive year, been crowned World’s Leading Luxury Resort in the World’s Travel Awards. 
Other projects of Sun Group in Danang and Phu Quoc were also highly regarded by Singaporean real estate companies due to their competitiveness, besides their relatively lower prices, and the 9 per cent profit rate commitment in the first nine or ten years of the renting programme.
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