Rising property market – Vietnam

With a communist government, most would not have considered Vietnam potential ground for a thriving real estate market. Their property market suffered a severe blow about 4 years ago when property bubble burst, leaving banks in debt and buyers and developers defaulting on their loans.

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Photo Credit: Phuoc Thanh Construction

But 4 years on, the government has injected stimulus into the real estate sector of up to US$1.4 million and has also restructured their banking sector to ensure history does not repeat itself. In fact, they have gone even further to relax rules on foreign investment money coming through their borders. Foreign firms, individual buyers as well as Vietnamese who have left the country during the war in 1975 – the Viet Kieu, are now able to purchase properties in Hanoi. And response has been overwhelming. One developer, Vingroup, reported a whooping 112 deposits on apartments within 2 hours of their launches specifically targeting foreigners and Viet Kieu.

Most foreign firms are keen to purchase properties to house their foreign staff. Intel and Samsung, which are situated in the Saigon Hi-Tech Park, are just a couple of the many international firms snapping up properties. Average prices of high-end apartments in the southern commercial hub go up to as much as US$1,800 per sq m. In the capital, prices are around $1,600, a number familiar to the property players before the last housing crisis. With a market value of US$21 billion, Vietnam’s real estate sector still has a way to go compared to Singapore’s US$241 billion, but that difference could be what most attracts investors.

High turnout at High Park Residences Launch

The sales gallery for High Park Residences was filled to the brim as 8,000 people came to view and 500 deposits were made for the 1,390 units. The previous prediction for the number of units to be developed in the site near Thanggam LRT station and the new Seletar Mall was only 1,130 but the developers, CEL Development, Heeton Homes and Kim Seng Heng Realty, had planned for a higher number of smaller units in order to churn out a larger number of new homes.

HIghpark ResidencesMost of the sales were for the two-bedders which are sized between 53 to 68 sq m (up to or smaller than the size of an older resale three-room HDB flat) and priced from $398, 000 for the record-setting smallest 36 sq m studio apartment in District 28. There were also three-bedders available at 81 to 92 sq m, and various other unit configurations such as four-, five-bedroom apartments, 10 semi-detached houses, 4 bungalows and 9 commercial units. But at the weekend launch, affordability was the key word, with most units under $400,000 being snapped up quickly.

Though the quickest sales were of these smaller units, property analysts are hopeful that the area will be developed for families in the future and as it will be some time before the next private residential property enters the market in this area, High Park Residences may hold its place in terms of demand and pricing for some time.

Resale private apartment prices remain level

Last month’s resale private non-landed property prices remained flat, which could be a sign that the market is bottoming out.

The back-and-forth quick-step between sellers and buyers is a dance familiar to market players, but they are expecting further falls in prices of 3 to 6 per cent, especially in the suburban resale property market. In the Central regions and prime districts, prices have fallen considerably since its peak in 2013, and thus it’s not surprising to find a rise in resale volume of late. Investors who have been on the lookout for prospective buys will be quick to jump on these units.

SimsUrbanOasisIn the suburbs, it is another picture altogether as prices have held relatively steady despite the property cooling measures. But the sheer number of new units entering the market, combined with the weakening leasing market, may bring an about-change soon. In addition, the per sq foot prices of newer condominium units have increased, due to their smaller sizes. What this could mean for the market is an expected further fall in prices as resale units will have to compete with the newer developments and the total quantum prices become more important for buyers.

But the industry could well expect and enjoy an increasingly positive resale volume as up to 6,000 resale units are projected to change hands this year.

 

Private resale home prices stabilising

With minimal fall in prices over the previous couple of quarters, could this be a sign that resale private property prices are stabilising? Could buyers be getting used to the current home prices and are coming back to pick up deals before a possible rise? Will the predictions of a 4 to 8 per cent drop in property prices this year continue on its track or will buyers buck the trend?

Botanique@BartleyThe NUS Singapore Residential Price Index (SRPI) has indicated a 2.2 per cent fall in resale condominium prices over the last 12 months. But since the first quarter of 2015, the fall has been more gradual and marginal, considering the expected 5 per cent year-on-year fall in prices per month in the last quarter of 2014. The next couple of months could be the watershed for the property market. A slow and small drop in prices could indicate a possible bottoming out of the market.

Part of the reason for last month’s 0.1 per cent fall in April could also be due to the high transaction volume. The recent new property launches of Botanique at Bartley and Northpark Residences may also have had a trickle-down effect on the resale market, in particular properties in the proximity of these 2 launches. Another promising bit of news is the 0.4 per cent rise in the prices of small apartment units up to 506 sq ft. A much untested market, particularly in the suburbs, as more commercial businesses move out of the central region and into the heartlands, the demand for these units may change in the next few years.

What makes a property tick – Exclusive address and prime location

Though the prognosis for real estate this year may not seem positive, some properties may still sell well. With bigger mass-market condominium projects slashing prices to bring in the sales, smaller developments with lesser units at a prime location and an exclusive address may take the cake this year.

Cluny Park ResidenceA recent million-dollar condominium at the Cluny Park area has garnered strong interest from buyers with thickly-padded pockets. With only 52 units for sale, the freehold Cluny Park Residence has already sold 20 – 6 two-bedders and 14 four-bedders. The project slated for completion in 2016 only has two- and four-bedders and is designed by SCDA Architects, the same people behind The Marq on Paterson Hill and Botanika at Holland Road.

Developers are upbeat about the ultra-rich still buying up properties with well-thought-out concepts, attractive locations and a strong potential for development in the area. In other words, those looking for long-term investments will still be on the lookout and may purchase whenever they come across a project worthy of their money.

Surprisingly, bigger units were the draw. A 754 sq ft two-bedder at Cluny Park Residence is going at $2.3 million and up to $8.3 million for a 2,842 sq ft four-bedder penthouse. The next exclusive mixed-use project to be launched is likely to be Ascent @ 456 on Balester Road this weekend. Prices for its 28 three-bedders of 689 to 829 sq ft are expected to be between $900,000 to $1.2 million and may be perfect for the beginner investor.

Shadows cast on property market

New properties are revving up their engines once more. As the market prepares themselves for these launches, what could the consumer expect?

Resale private properties situated near the sites of new properties to be launched this year may be slightly affected by the prices set by these new kids on the block. And as resale HDB flat prices dip, HDB upgraders may also not have as much as before to spend.   As developers find it harder to attract buyers since some have since redrawn from the investment pool as their finances are restricted by loan limits and mortgage curbs, prices of these new properties may be lower than expected. Properties nearby may then be forced to do the same with their resale units.

Tanglin ViewIn areas with potential for redevelopment and growth, such as Alexandra and Tanglin, competition may be fiercer. For example at Tanglin View condominium, the going rate used to be $1,600 psf a year ago, but now the average selling price stands at $1,400 psf. Similarly for Ascentia Sky apartments, prices have dropped from $1,900 psf to the current $1,500 psf.

But there are still profits to be made for private property sellers. Even though prices may not be as high as a couple of years ago, properties which were purchased 10 to 20 years ago may still find suitable buyers. Property prices today are definitely still much higher than a decade ago. Those who were hoping to rake in a quick profit with properties bought less than five years ago may find themselves having to hold on to their properties for slightly longer to wait out this year’s lull.

For the serious home buyer, it could be the prime time to buy.

Foreign property buyers not biting

National Development Minister, Mr Khaw Boon Wan has announced a significant drop in the number of foreign buyers of property in Singapore, from 17 per cent in 2011 to only 7 per cent in Q3 of this year. From 1, 400 transactions per quarter in 2011, it’s now down to 330 transactions last quarter.

Was the high in 2011 reason for the government implementing the 10% Additional Buyers’ Stamp Duty (ABSD) in December of the same year, and is the current drop the intended goal of that exercise? Sub-sales, which are an indication of the property speculation level in the market, has decreased by 3 per cent. It stood at 7.6 per cent in 2011.

The Creek in Bukit Timah.

The Creek in Bukit Timah.

This year, there were a few rounds of property cooling measures, including a new debt-servicing framework and also caps of loan limits. Increase in the ABSD percentage may have also put a bitter taste in the mouths of some investors. The luxury market has been quiet for awhile, but property developers seem to be hopeful about next year, with some holding back on launches, waiting out the year-end festive period which is usually a lull period for the property market.

Moving forward, Mr Khaw says regulatory policies will need to remain nimble in order to deal with a fluctuating and ever-changing industry. Although many other countries have had stricter property-buying rules for foreign buyers, such as in Australia, it does not necessarily mean the property market is entirely stable. They are in fact experiencing signs of a property bubble and thus being able to react to market response is a skill the authorities will have to hone. Perhaps also with some good luck on the side.

There are no restrictions on foreigners purchasing properties in Hong Kong. Will investors turn their attention there instead? A comprehensive listing of properties for sale and rent are available at GoHome.com.hk.

There are now increasing restrictions on foreigners purchasing properties in Hong Kong. Will investors turn their attention elsewhere instead? A comprehensive listing of properties for sale and rent are available at GoHome.com.hk.

In Hong Kong, the government is already imposing a 50% down payment on properties. With the minimum sum raised six times over less than three years, they seem determined to find ways to make homes more affordable. The Singapore government has not resorted to such drastic measures yet, but in future, will we go down the same road? Will more Singaporeans be able to afford their own homes then?

EC Easy

Despite the recent loan curbs flexing its muscles, the market seems to be responding with exuberance, but only to executive condominiums (ECs). The financial restrictions placed on property loans may have made it more difficult to purchase private properties, but it has not yet applied to executive condominiums, thus making this sector ever more attractive to buyers. In any case, ECs will become private properties once it passes the 10-year mark.

Sea Horizon EC near Pasir Ris Beach.

Sea Horizon EC near Pasir Ris Beach.

What makes the difference? If you own a HDB flat but wish to apply for an EC, you need to sell your HDB flat once the EC is completed. Which means you only essentially have one property at hand at any one time. And under the new TDSR (total debt servicing ratio) framework recently set by MAS, the bank will only calculate the monthly payment for your EC unit. But if you were to purchase a private property whilst holding on to your HDB flat, the bank will calculate the monthly mortgage payment of both your HDB flat and private property, which makes it harder to loan the maximum amount. This in totality, affects the amount of money you can loan from the banks, and thus may require you to have more cash available before making a private property purchase.

LUsh AcresThe most recent EC launches were wildly received by buyers, Sea Horizon in Pasir Ris mostly for its unique location and Sengkang’s Lush Acres for its amenities and potential for growth. Sea Horizon was oversubscribed by three times, with 1,500 applications for its 495 units, making it the most subscribed EC in 2013 thus far. Most exec condos have been located in centralised, more urban landscapes, but Sea Horizon overlooks Pasir Ris beach, making its seaviews a unique selling point for its developers, Hao Yuan Investment and Sustained Land. Over at Lush Acres in Sengkang, 76 per cent of its 380 units were already sold over the weekend. Prices averaged at $785 psf and total prices ranged between $704, 000 to $1, 275, 200.

With this new consideration in sight, will buyers now flock more fervently to EC launches and could this possibly nudge the authorities to in turn adjust the criteria for EC purchases? How will that affect the overall real estate landscape?