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Property cools in capital with glum economy   2008-07-20 - VNS

Certain sectors of the Ha Noi real estate markets have cooled over the past few months as a result of the global economic slowdown, domestic inflation and limited liquidity on the market driven by high interest rates.

Marc Townsend, managing director of the property management firm CB Richard Ellis Viet Nam, made the announcement at a seminar reviewing the city’s property market in the second quarter of the year. It took place in Ha Noi on Thursday.

World oil prices are up 41 per cent so far this year, seriously impacting the world economy. Domestically, the inflation rate has climbed to 18.4 per cent in the first six months of the year, and the State Bank of Viet Nam has raised the prime interest rate to 14 per cent.

"The recent credit tightening has most severely impacted domestic real estate developers requiring construction loans, and home buyers seeking mortgages to purchase a home," said Townsend.

The office market saw few new openings of Grade A and Grade B spaces. Only two new Grade B office buildings, King Building and the Military Bank Building, opened.

Rent remained high, averaging $51 per sq.m per month for Grade A space, up 9.8 per cent from the first quarter. Average rent for Grade B space was $35 per sq.m per month, an 11 per cent increase.

The occupancy rate remained at around 98 per cent.

A.T. Kearney’s annual Global Retail Development Index recently ranked Viet Nam as the most attractive retail destination among 30 emerging markets, according to Townsend.

"Despite some slowdown in the city’s real estate development activity and economic growth... demand for retail space has been stable," he said.

Average rents in Ha Noi’s major shopping centres remained level at $65 per sq.m per month, the same level seen in the first quarter.

"The limited stock of prime retail space continues to challenge retailers seeking to expand their operations in the city."

In the residential market, capital values for central locations have fallen slightly from the first quarter, while projects in the initial development stages and in remote locations have been vulnerable to the downturn, losing up to 15 per cent of their capital value.

Condominium prices ranged between $700 and $3,600 per sq.m in the second quarter.

"Construction delays due to increased prices of materials and labour and more difficult financing conditions are expected to slow the introduction of new stock into the market," said Townsend.

Construction costs are now estimated at $600-1,900 per sq.m, a year-on-year increase of 25-85 per cent.

The serviced apartment sector saw an increase in vacancy as a result of the 500 new units that came on-line during the past eight months in Alanta Residences, Skyline Tower, Somerset Hoa Binh and Fraser Suites Ha Noi.

However, the most popular serviced apartment projects in prime areas are still running at 95-100 per cent occupancy and are expected to maintain their low vacancy rate.

The demand for apartments came from expatriates and "had been slower than anticipated," he said. "This could be because companies have become more price sensitive with the global economic downturn."

"The long-term outlook for the serviced apartment market is still positive as the number of expatriates working in Ha Noi is expected to steadily increase in the medium to long-term."

In the hotel market, the average daily room rate for five-star hotels reached $158. The occupancy rate remained nearly identical to that in the first quarter, at 70 per cent, but was expected to increase by the fourth quarter, "a traditionally high season for tourist and business travel".

The property market’s medium and long-term prospects remained strong in the city, Townsend said. He stated that the country had lured over $31 billion in foreign direct investment in the first six months, the majority of which went into property development.

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