Real Estate in 2012: Ice will thaw

While sharing common opinion that real estate market will still face difficulties in 2012, many real estate businesses suggest that there are signals of recovery and it is likely that by the end of the year, the frozen market will be thawing.

Credit regimes will govern the market

Mr. Trần Minh Hoàng, Chairman of Board of Directors, Vinaland

2011 was a year full of difficulties for real estate market. Rows of ongoing projects should stop, and planned projects should withdraw due to extreamely high loan interest and slow sale. There are several reasons of such a situation, however, I think that the most important one was the restricted credit regime and the high loan interest.
In 2012, credit regime will still decide whether the real estate market will be frozen or soar. In case the credit regime is still restricted and the loan intereset is still high, most of ongoing projects will have to be suspended, and planned projects will not be put into implementation; because no one dare to invest. In this scenario, real estate market will fall into a dramatic situation, many real estate businesses will be bankrupt.
So far, real estate is a common property that is frequently used in mortgages. Once the real estate transactions are frozen, banks, steel, construction businesses will also be severely impacted.
Reversly, in 2012, be inflation control measures successfull, loan interest reduces, it is projected that real estate market will be active again. Sale price may stay unchanged under pressure of excess of supply, but is can be sure that there will be lots of transactions. At present, price of real estate in Ho Chi Minh City had been significantly reduced.

Good moment for potential investors to enter market

Mr. Trần Ngọc Quang, General Director, VINACONEX - ITC

Current real estate market is creating lots of attractive opportunities for customers. With the same money as before, investors can buy more beautiful and higher quality products. Therefore, although this is a difficult time, but at the same times, it is a good moment for potential investors to enter the market. This is also a good time for businesses to reconstruct and improve their "health".

For Vinaconex-ITC, highest business objective of 2012 is to make reliable investment, and to introduce products suitable to market change. At the same time, we should not be too subjective, because so far, there are still no clear signs that the market will be better in the near future.
We will focus on development of infrastructure at potential areas of Cat Ba Amatina Project with investment commitment of secondary investors.
 With regard to the villas, the sale of new products is still ongoing, but such sale is not at our focus. Instead, we will pay more attention to completion of sold villas to keep implementation progress as committed.
At present, many foreign investors pay attention to Cat Ba Amatina Project. It is very important for us to show them our actual capacity and reliability so that to invite them making new investment.

Small apartments "rescue" real estate market
Mr. Nguyễn Văn Đực, Deputy General Director, Đất Lành Ltd.

Our initial statistics show that currently, in HCMC, over 70% of ongoing projects are suspended due to the lack of investment capital. Many businesses are facing dilema. In case the scenario continues into 2012, it could be sure that many businesses will "die".
The most danger factor is that in real estate business, the loans exist like a chain: investors debt banks and contractors, contractors debt construction material sellers, the sellers debt banks. Therefore, in case real estate businesses "die", many other businesses will be deeply impacted.
In my opinion, real estate market is dependent on two factors. First, credit regime should be opened. However, this is still dependent on macro economy. In current situation, while price of electricity, water supply and many other essential goods is on increase, the inflation reduction will be very difficult. And once the inflation can not be reduced, it is very hardly to reduce loan interest.
Therefore, the Government would better to allow real estate businesses to build small apartments. The ongoing apartment projects should be allowed to reduce apartment area with the view to reduce their price. Only in that case, customers can buy apartments without relying too much on bank loans.

Market will have bright spots
Mr. Lê Hùng, General Director. Hoang Anh Housing Development and Construction JSC.

At present, many people think that there is surplus of supply in the real estate market. However, in fact, supply is still short compared to the demands for living spaces.
In recent time, real estate price reduced considerably. Many businesses sold their products at or even below production cost, but such price is still not affordable to most of people who has actual need for housing.
So in 2012, major question of the real estate market is how to match supply and demand. In order to answer this question, real estate businesses should introduce to the market their products that are priced reasonably to customers’ demands and buying capacity. However, real estate businesses alone are not capable to do so.
In practice, the real estate price was “sky-high” not just because developers wanted to do so. It was mainly because all kind of expenses such as loan interests, site clearance and compensation expenses, land use tax, etc. made the price high. Therefore, in order to introduce reasonably-priced products, real estate businesses should be dependent on many outside factors, especially the credit regimes.
There should be a solution for real estate businesses to access bank loans with interests of 14-16%/year. Businesses also should speed up the project implementation progress. Only then, may businesses be active in identifying price. On the other hand, when loan interest reduces, the keeping of money in bank accounts will become less interesting and people will turn to real estate investment.
In my opinion, in 2012, real estate market will still face difficulties, but there will be some bright spots. Presently, Government is realizing its commitment to reduce inflation and, I really hope that in 2012, inflation will be reduced, credit policies will be better.
We continue to invest in real estate projects, but will focus mainly on the housing for middle-income people. Now we finished the base of a 2000 apartment project and will open sale in 1st quarter of 2012.
Low price apartments and villas will draw attention
Mr. Nguyễn Thành Trung, Genral Director, Archi Land Corp.

In 2011, almost all difficulties and weaknesses were discovered. 2012 will be the year when market adjustments will be realized. It is also the time, when those reasonable adjustments will gradually gain back investors’ trust.
Low price apartments continue to be traded because they satisfy actual need for living house of people and require less investment. In addition, villas also enjoy preferable attention and stable sale because they are a safe and good investment.
In 2012, Archi will focus on development of villas outskirt of Hanoi, with distance ranging from 30-60 minutes riding. This market section enjoys the good infrastructure for stable growth potentials; villas can either be used or leased by investors. Archi will also complete to put into operation another villas project to serve increasing demand for resort housing of the people.
Our 2012 projects will maintain our previously set standards on construction ratio, unique design rich of traditional elements and environment-friendly.
Middle section of the market will be the most favorable

Mr. Phạm Ngọc Tùng, Head, Business Department of Daewoo-Cleve Project

Restriction of money flow and reduction of public expenses made real estate market more difficult. Risk to reconstruct and merger commercial banks shows that there will be no big money supply for real estate market from the banks, except a small scale promotion program that should be considered and approved by the Government.

All those factors are “knock out” for investors who are financially weak, who made wide investment and who unreasonably utilize their capital. However, those factors also comprise a strict filter for the market, after which, only projects that have sufficient scale, strength and customers’ support can survive.

Who will be buyers of houses and what kind of houses will they buy? Those are the key questions of the real estate market in 2012. It is sure that only those people who buy house for living, for leasing or for keeping capital will participate in the real estate market.

Thus, middle section of the market will be the most favorable one, although smaller number of customers will buy high-class houses for their children or for lease.

Projects that have reasonable scale, quality and conveniently located will draw attention of customers. Projects that have reasonable pricing and payment regimes compared to bank interests will be more favorable. In addition, projects that have comprehensive infrastructure and integrated utilities and services, including building management services, will be most selected.
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