Foreign investors will start to shift investment from HCM City to Hanoi this year, says Marc Townsend, managing director of Property services and consulting firm CB Richard Ellis (CBRE) Vietnam Co.  

At a real estate conference held last Wednesday in the capital, Mr. Townsend said about 80 percent of its investors’ last year capital has been poured into the market.

He said both foreign investors and Vietnamese government had been very active in the market.

“Malaysian and Singaporean investors view the city as a promising market,” said the MD.

Weathering the global economic downturn, Vietnam reached a positive GDP growth rate in 2009. Interest rates were increased by one percent on December 1, a move designed to limit credit growth and rein in inflation.

CBRE forecast that new legal documents on the market would provide foreign investor with new opportunities.

Marc Townsend said the opening of many important projects such as Vinh Tuy and Thanh Tri bridges and the Kim Lien tunnel relieved traffic congestion on Ring Road 1. Construction will begin on two metro lines early this year.

However, he said, congestion, pollution and poor public transport were still barriers for foreign investors to put their money into infrastructure development.

Townsend said demand for tenement apartments would increase because most of Vietnamese people cannot afford villas.

CBRE said more and more Vietnamese were looking for second homes and that the company would focus its attention on local people rather than foreigners.

The company also predicts that demand in the office-rental sector will almost double this year as more large companies will consolidate offices, expecting longer leases and favourable rentals, the MD said adding that his company was moving its offices from HCM City to Hanoi.

He also predicted that serviced apartment prices would increase. Last year 80 percent of the apartments up for lease found tenants, while by the middle of this year the figure would be 95 percent, he said.

Hotel occupancy rate this year is also expected to surpass last year’s figure.

Oversupply in HCM City

CBRE forecast that the residential segment in HCM City would face fierce competition due to oversupply in and around the city.

Townsend cited a backlog of apartments from 2008 and 2009 as a reason for the market glut.

Launches expected this year would add an additional 30,000 units, triple the amount in 2008 or 2009, and contribute further to the competition, he said.

He added that affordable and mid-range products would continue to dominate the market.

Brand, location and price would be the primary concern of buyers, but the super-deluxe segment would also emerge and attract serious attention, he said. Condos priced at US$10,000 per square metre and villas costing US$3 million will be offered in this segment.

In the serviced apartment segment, around 370 new units from three projects each in districts 1, 2 and 7 are expected to be offered. With limited supply, the slight increase in demand can have significant impact on occupancy, according to the CBRE report.

Meanwhile, the occupancy rates of hotels in HCM City to date are on a par with previous years, reaching 85-95 percent during peak weeks, and the market is expected to recover steadily. The positive outlook is based on strong growth in local demand as well as the return of international business travellers in MICE.

Almost 500 hotel rooms are expected to join the supply in 2010 and 3,000 rooms will be added over the next three years, according to CBRE forecast.

 

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