Director thinks real estate has a few years to go

According to Richard Leech, Director of CB Richard Ellis Hanoi Branch, Vietnam’s real estate market will only see big changes in two or three years, not in 2008, in an interview with Thoi bao Kinh te Vietnam.

Many asked Mr. Leech if he thought 2008 will be the year of banks and real estate, he says that 2008 will certainly be the year of banks, but not property.

2008, like 2007, will witness the groundbreakings of a series of major real estate projects, including Vincom City Tower 2, BIDV Tower, Crown Plaza, the Keangnam Hanoi Landmark Tower, The Landmark, CEO Tower, Indochina Plaza, and these are just those in Hanoi.

The projects will only be completed and become operational in two or three years, and the real estate market will see big changes by that time.

Vietnam’s real estate market, like other markets around the world, is influenced by many factors: the rule of supply and demand, the oil price increases, Vietnam’s WTO membership and the stock market fluctuations. Besides, it is also influenced by other factors, such as the limited land fund, poor infrastructure and problems in investment procedures.

Mr. Leech thinks that the real estate market will develop rapidly in 2008 and in the coming years. In 2008, prices will increase sharply as the supply still cannot meet the demand. Not many real estate projects will be put into operation in this year.

He said that Vietnam’s real estate market is big enough for every investor. CBRE has been operating in Vietnam for five years; they have 10 employees working in their office in HCM City and 40 employees in Hanoi. The company is also planning to operate in other big cities, including Hai Phong, Da Nang, Nha Trang and Can Tho.

Besides foreign invested real estate firms, Vietnamese big groups like Viglacera (specialising in construction materials), FPT (Information Technology), Bitexco all have set up the companies in charge of real estate development projects. This shows big potentials of Vietnam’s real estate market which is has opportunities for everyone.

According to Mr. Leech, there are three biggest problems in the real estate market 1. the limited land fund in the central area 2. the high land prices and 3. the poor infrastructure and the difficulties real estate project access.

However, he believes that the Government of Vietnam and relevant ministries will take suitable measures to settle the problems. For example, the Government is considering allowing foreigners to buy houses in Vietnam.

Many people fear that if the plan on allowing foreigners to purchase houses in Vietnam becomes true, the real estate prices would continue skyrocketing. However, Thoi bao Kinh te Saigon quoted Mr. Marc Townsend, CBRE Managing Director as saying that this will only have a little impact on the market.

He said that the number of foreigners eligible to purchase houses in Vietnam will not be high, several hundred, or may be several thousand. Therefore, the scenario that big sums of money from Hong Kong or Singapore flow to Vietnam to pay for house purchasing deals will not occur.

In fact, many foreigners are considering purchasing houses in Vietnam, but they still have to consider profit potential and the taxes.

Mr. Townsend does not think that the potential decision by the central bank to limit the lending to real estate investors will seriously affect the market. In fact, Vietnamese people do not invest in the real estate market with bank loans, but they use their own money and gold. People still want to buy more land and houses for resale because they believe the value will continue going up.

According to him, the trend of thousands lining up to purchase apartments, which was seen in 2007, will repeat in 2008.