Vietnam - Capital likely to flow into property market on interest rate cuts

Many investors have considered withdrawing their deposits at banks to invest in other sectors, of which property is given the first priority following a range of interest rate cuts.

A variety of large commercial banks took the lead in lowering mobilisation rate to below 14pct since early February.

The end of 2011 saw lending rate falling to 17pct-19pct and liquidity has significantly improved in the first two months of 2012, according to Nguyen Van Binh, Governor of the State Bank of Vietnam. Recent days have witnessed interbank rate dropping to below 10pct and several small commercial banks bringing down mobilisation rate to less than 14pct.

As a result, many investors have now turned to other investment channels since depositing actually would not be an optimum option.

The past two weeks have seen an increase in the number of customers asking for real estate information, according to property offices in Le Van Luong Street. Despite the modest successful transactions, the movement partly signals the warming of the market.

Many has taken the advantage of acquiring land plots of 2-3million dong per square metre cheaper than the prevailing prices for the past few months, revealed Nguyet Nga, director of Phat Loc Real Estate Company.

House price at Van Phu project, for instance, is currently 45 million dong per square metre in comparison with 70 million dong per square metre in the bustling period.

In fact, many investors have adopted the "wait-and-see" attitude on hope for further price drops. Yet, this prospect could hardly be evident as barely could any projects have the prices lowered further considering the price drift of materials and salary.According to some property firms, in the light of comparison between investment costs and selling prices, the bottom of the property market was figured out in 2011.

Specifically, enterprises suffered drifts of prices of 50 percent, of which 35 percent of input materials, 20pct interest payment, let alone management costs and wages. Therefore, it is high time tSTC of real demand purchased houses.

Reporters' survey among several property projects in Ha Dong, Tu Liem and Hoai Duc revealed a small number of projects on sale and fairly stable prices after falling for a long time. For instance, house price at Van Phu project hovers between 42-45 million dong per square metre, An Hung project 52-55 million dong per square metre for adjacent houses and 45-48 million dong per square metre for villas, Van Canh 38-40 million dong per square metre for adjacent houses, Duong Noi project above 40 million dong per, Geleximco Section A 45-50 million dong.

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