As Asian property prices surged 70 percent or more over the past two years, skeptics have warned that a bubble was brewing. Now it looks like that bubble is bursting. Real estate prices are falling in Beijing, Hong Kong, Singapore, and all over Vietnam. Most analysts expect the decline to remain moderate, with prices buoyed by Asia’s strong economic growth, but recall that most analysts foresaw nothing more than a mild correction in the United States when real estate prices crested in 2007.
Singapore is one market where analysts do fear a market plunge. Supply trends certainly aren’t bullish. More than 100,000 new residential units will likely come on the Singapore market in the next three years, according to Standard Chartered analysts. In China, the deflation of the housing bubble is already in the works, as well.
But what about Vietnam?
According to a recent FT article, with annual lending rates increased to more than 20 per cent last year to fight Asia’s highest inflation rate, the once flourishing property market seized up and prices tumbled. Premium office rents have fallen from above $80 per square metre per month in 2007-2008 to below $30. Hundreds of projects under construction across Vietnam are “in hibernation,” according to Marc Townsend, managing director of the Vietnam branch of CB Richard Ellis, an international property agency.
Still according to the article:
“Phan Thu Ha, a 40-year-old housewife who bought an apartment in the Botanic Towers complex in Phu Nhuan district in 2010, is one of many small investors sitting on substantial paper losses. “I feel very frustrated,” she says. “One of my friends from Hanoi just came here and bought an apartment in Botanic Towers but she paid much less than I did in 2010.”
“By opening up the economy before joining the World Trade Organisation in 2007, Vietnam’s Communist rulers achieved the highest growth rate in Asia after China and India. But, propelled by a large expansion in credit, the boom came at the cost of economic stability.”
Banks at risk…
Moody’s warned this month that the Vietnamese banking system was “highly exposed to external shocks because of the country’s relatively undiversified economy and weak financial system.”
“Banks don’t want to declare non-performing loans so they are rolling over or restructuring as it is better for their results,” says Fraser Wilson, who runs a London-listed $90m property fund for Dragon Capital, an investment management group in Ho Chi Minh City.
Source: Financial Times