11 new launches are expected in next 3 months

Buyers are spoilt for choice as market watchers are expecting 11 more project launches in the next 3 months.  One of which is The Sorrento, a freehold condominium by Allgreen located at the former Regent Gardens site along West Coast Road. Consists of 131 units ranging from one-bedroom to three-bedroom, the project is expected to be transacted at $1,380 to $1,600 per square feet (psf).

The next in the line is Hong Leong Holdings’ Commonwealth Towers located along Commonwealth Avenue. The 99-year leasehold project with 845 units will be starting its sale on labour day and is expected to sell in the range of $1,600 to $1,800 psf for one-bedder to four-bedder on average.

Over the next two month, there are about nine other projects coming onto the market with five of them located in the city fringe, two in city centre and three in the suburban. The city fringe has Kallang Riverside in Kampong Bugis, Amber Skye in Amber Road, The Crest in Prince Charles Crescent, Highline Residences in Kim Tian Road and Pollen & Bleu in Farrer Drive. The city centre has the highly anticipated Marina One in Marina Way  while the suburban is expecting previews of Waterfront@Faber in Faber Walk, Coco Palms in Pasir Ris Grove and probably Far East Organization’s Bijou in Pasir Panjang.

Consultants expect more home sales with the increase number of project launch. in view of the reduced pool of buyers, consultants noted that developers are likely to pace their launches to avoid  a huge supply coming onto the market.

Industry experts predict new home sales in April to be between 500 to 800 units.

Vietnam – High-end apartment sales improve amidst soft property market

IPH

Buyers’ interest in the high-end apartment segment seems to come back despite the fact that this segment is not targeted part by the government’s real estate stimulus package.

According to analyst houses, sales of high-end apartments priced at over VND30 million (US$1,400) per square metre (psm) is showing improvement. With developers trying to woo customers by promotional campaigns such as price discounts, guaranteed rental yield etc., sales for this segment had shown more activities than usually seen in the post-lunar new year periods. Some of the projects in Hanoi that were successful with such campaigns include Dolphin Plaza, Indochina Plaza Hanoi (IPH), Golden West Residences and the Watermark. Good sales were also observed at Hoa Binh Green City, N04 Trung Hoa Nhan Chinh and Trung Yen Plaza.

For the overall market, according to the Ministry of Construction, there were around 1,300 units sold in the first 2 months of this year, doubled that of the same period last year.

Indochina Plaza Hanoi, an apartment and retail complex by Indochina Land, had seen 11 units sold in 2014 Q1 despite the price of a higher range VND51 millio (US$2,400) psm. The project offered customers with a guaranteed rental yield scheme of 7-8 per cent per annum.

Projects of reputable developers that are completed or close to completion are the most popular choices to homebuyers nowadays. Also, projects in central locations still remain high prices and are sought after by buyers due to limited supply. Hoang Thanh Tower (located in a golden area of Hanoi) has maintained selling price of VND80 – 100 million (US$3,750 – 4,696) psm. Watermark project is selling for up to VND60 million (US$2,800) psm, while D’Le Pont D’or – Hoang Cau is selling for over VND40 million (US$1,878) psm.

Punggol transforms into a holiday destination

In a span of 7 years, Punggol has transformed into a desirable estate where many wants to live in. From a small population of 42,000 in 2007, the population in Punggol increased to 83,300 last year. Some of the key features of the estate include waterfront housing, exciting water and leisure activities as well as great access to nature.

Punggol is now far from being a quiet and remote farming area. Visitors and residents get to enjoy a short getaway at the horse farm chalet, seaside dining on the boardwalks and outdoor watersports at Punggol Waterway. Some residents have noted the increase in crowd on weekends as well as during weekdays.

However, shopping centres and childcare centres are still lacking. Estate agents noted that the lack of supporting amenities is the key reason for young couples moving out of Punggol.

Plans to increase these facilities are in place to meet the needs of young couples who make up a huge proportion of Punggol residents.

Lower land price recorded in the latest tender at Prince Charles Crescent

The latest land tender exercise under the Government Land Sales programme was awarded to a consortium of UOL Venture Investments and Kheng Leong Company at $463.1 million.  The price per square feet per plot ratio (psf ppr) is $821 for the 263, 713 sq ft land at Price Charles Crescent. The winning bid falls within the lower range of the predicted winning bid by property consultants. 

When compared to the adjacent site, Parcel A, that was sold 2 years ago, the winning bid for Prince Charles Crescent (Parcel B) is about 10 per cent lower. Located in a prime location, 10 minutes away from Orchard Road, the site only received interest from 7 bidders.

Consultants think that the tender result reflects the impact of the various cooling measures, the loan restriction framework and developers’ concerns in the slowing residential market. New sales launch are receiving poor response and there are a lot of unsold units in the vicinity of the area.

With a maximum permissible gross floor area of 564,308 sq ft, the site can yield about 750 residential units. A spokesperson from the consortium stated that realistic pricing can be adopted for the site to entice buyers.

Vietnam market – is it time to reenter this market?

Prior to the Global Financial Crisis, Vietnam was an up-and-coming property market.  Since the global financial crisis hit in 2008, the Vietnam property market has been going through a long cold winter.  Property prices in the 2 biggest cities, Hanoi and Ho Chi Minh City, have dropped by approximately 30% since its peak in 2011Q1. The property price index has been on a downward trend for 8 consecutive quarters (see Figure 1 and 2).

Figure 1: Property Price Index Hanoi

Figure 1 - Hanoi Property Price Index

(Source: Savills)

Figure 2: Property Price Index Ho Chi Minh City

Figure 2 - Ho Chi Minh Property Price Index

(Source: Savills)

Although developers started seeing some market activity in the last quarter of 2013, the movement was slow and volumes were modest – a far cry from the boom times.  Some of these developers lament that during the property golden years of 2007 and 2008, eager buyers would arrive in droves and queue past midnight, just so they could make a deposit for a unit and be part of the action.

At present, fortunes are reversed.  Buyers are now spoilt for choice and developers have to carry out promotional campaigns in order to attract potential buyers.  The type of buyers entering the market now is also quite different.  In the past, there were more investors.  These days, most of the buyers are locals who are looking for a place to stay.  Nonetheless, small units at affordable prices in acceptable locations will still attract some niche investor interest.

Is it a good time for foreign investors to enter the market?

Supply wise, more than 9,300 residential units were sold in 2013 for the 2 largest cities.  This is an increase of about 20%, as compared to the previous year, 2012, where only 8,000 units were sold.  Moving forward, more than 120,000 units are in the pipeline for the 2 cities as more than 170 projects have received state approval and started construction.  Based on the absorption rate for the past few years, it is unlikely that the market can absorb the “tsunami” of units that is expected to come online.

Given the huge supply in these 2 cities, most Vietnam market stakeholders are of the view that prices will remain flat for the next 2 years. Even though buyers, who have been waiting on the sidelines, could start spending in 2014, prices are not expected to boom due to the excess supply.

In terms of monetary policy, the Vietnamese government has maintained a stable interest for Vietnamese buyers.  Since July 2013, the lending interest rate for individual property purchasers is about 10-12% per annum.  Putting things into context, in the past few years, interest rates in Vietnam were as high as 20% per annum at one point.  Thus, providing a stable interest rate environment is one of the measures that the Vietnamese recently took to restore consumer confidence.

Admittedly, investment opportunities for foreigners in Vietnam are still limited due to the property ownership policies currently in place.  While there have been attempts to open the market to overseas investors, there are constraints as to who qualifies to purchase a property.  Specifically, the groups of foreigners who qualify include those making direct investments into the country, those holding managerial positions or special skills as well as those married to Vietnamese citizens.

Conclusion

In conclusion, the Vietnamese property market is largely focused on serving the domestic market.  There is presently limited scope to what overseas investors can do.  However, all these could change as the Vietnamese government is actively reviewing the foreign ownership regulations.  In the past 6 months, there have been numerous discussions and some of the proposed changes include expanding the scope of ownership as well as the right for sales and purchase for foreigners.

At this point, it is still too early to say when these measures will come into force.  However, investors can be sure that when it happens, it will be another boom time for the Vietnamese property market.  And hopefully some of you will be there to go along for the ride.