Situation analysis of the Vietnam real estate 8 months 2010

SITUATION ANALYSIS OF VIETNAM REAL ESTATE 8 MONTHS 2010

I. Macroeconomic situation 8 month 2010
1. GDP growth and CPI
Step into the first month of the third quarter, the economy, "gearing up" from the 6.16% growth in first half year, to maintain high levels of multiple targets. Over the same period, industrial production was estimated to be 7 months in 13.5% of total output of aquatic products increased 4.7%, exports increased 17.5%, imports up 25.5% .. . The targets are at relatively high compared with the previous period decreased.
The consumer price index of 8 months rose 5.08% compared to May 12/2009  ability to reach out a plan to control inflation below 8% a year.

2. Trade balance
- Export:
Exports in August is estimated to reach $ 6 billion the same size as the export of July (6029 million). The domestic sector reached 2.8 billion, the foreign investment (FDI) reached 3.2 billion (including $ 350 million crude oil). Thus, if other than crude, FDI sector 2.85 billion higher than the entire export sector to domestic enterprises (including SOEs and private enterprises in the country).

Export situation of the eight months reached 44.521 billion dollars (in the domestic sector 20.557 billion, FDI sector 23.964 billion (including crude oil and 3.313 billion, or 20.651 billion excluding crude oil).

- Import:
Imports in August is estimated at 6.9 billion dollars (lower than in July (7.007 billion) a bit). In which domestic sector imported 4 billion, FDI sector 2.9 billion. Thus, both areas are in deficit in August.

Import data synthesis of 8 months: 52.676 billion U.S. dollars (domestic sector 30.305 billion, FDI sector 22.371 billion).

- Trade balance
Thus, the total deficit of eight months was 8.155 billion. It can be seen FDI export suplus if including crude oil, but if other than crude oil in this area and also the trade deficit (1.72 billion U.S. dollars, accounting for 21% of the deficit). Also visible trade deficit is largely from domestic enterprises.

3. FDI
In the eight months of 2010 FDI capital registered 5.11 billion by 87.7% as compared to last year, while FDI disbursed by 103.6% to 7.2 billion.

4. FII capital and Remittance
In six months in 2010, the amount of domestic remittances transferred is estimated at approximately $ 3.6 billion. Source remittances mainly by overseas Vietnamese and Vietnam to work, study abroad to their relatives in the country.

Statistics of the State Bank (SB) showed that, in the quarter I/2010, remittances transferred to countries reached 2.05 billion, up 30.5% over the same period in 2009.
Along with the evolution of economic optimism, Vietnam's stock market has returned to prosperity and attract inflows of foreign indirect investment (FII) is estimated at approximately $ 350 million.

5. Rate
USD / USD has risen to 5% from the beginning of this year, on 17.08.2010, the State Bank for the adjustment of rates, average inter-bank between Vietnam dong and U.S. dollar applied on 18/8/2010 from the level of 18,932 VND to 18,544 VND (nearly 2.1%). While exchange rate unchanged at + / -3%. This is the second time since the start of the State Bank's direct foreign exchange interbank average. Previously, on 02/11/2010, operator of monetary policy have also decided to increase this rate more than 3%, up to 18,544 VND and fixed it so far.

Exchange rate JPY / USD has risen to (early 198 JPY / USD, then this is 230 JPY / USD), especially when China invested in Japanese bonds. This is quite a sensitive issue when the JPY over 40% in $ 29 billion debt basket of Vietnam.

6. State Policies on Real Estate
According to the Circular 13 have effect on 01.10.2010, the loan business real estate risk coefficient to 250%. With the increasing risk factor for the business of real estate up 250%, while increasing capital adequacy ratios (CAR) of banks to 9% will result in housing loans will be difficult more, because the banks will have to narrow the field of credit to secure capital for the banking system.

However, under the action from the Government Decree 71 guiding the implementation of the new housing law also previously issued on 23/6/2010 and have effect on 08.08.2010. Investor major real estate business, have the financial resources have the opportunity to mobilize a more open way, can be widened capital investment projects in many different ways to mobilize as defined be mobilized before the 20%, bonds, ... (Article 9 of Decree 71). In contrast, secondary investors, individuals, ... are now facing many difficulties before the strict provisions of this Decree.
 
The offer to purchase by contract of capital contribution in proportion very large transactions on the real estate market in the recent past, is now limited. Add to that, the Circular 13 is effective for providing credit markets would be narrower. Meanwhile, the buying and selling real estate now used pretty much from bank loans along with deposit rates from banks are high, this will impact the market and at risk of freezing .
 
II. Supply and demand situation of the property in August
1. Supply sources
- Ho Chi Minh City
There are about 11,200 apartments sold in the primary market in Ho Chi Minh City in the second quarter in 2010, an increase of 24% compared to quarter one in 2010. Second quarter have 14 new projects to participate in the primary market for about 3,100 flats offered for sale. Secondary source, about 49,400 apartments, up 2160 compared to the first quarter of 2010.

- Ha Noi
Statistics of Vietnam Real Estate Association show that since the expansion of Hanoi, the review of more than 800 projects, planning projects done very slowly, has just announced the first phase. There are projects already licensed 3-4 years have not been implemented, the documents detailed planning has been repeatedly adjusted locally.

This situation will not last long, because the real estate market in Hanoi will be abundant supplies, ending a long period scarce commodity resources ... In September 10/2010, the Prime Minister will approve the Hanoi General Master Plan. Meanwhile, more than 800 projects were halted after Hanoi expansion will continue. In addition, Hanoi is conducting the review second stage for more than 550 projects in over 800 total projects, projects in the province capital expansion. Before that, 244 projects reviewed in the first area has finished.

- Da Nang
Along the beaches of Da Nang city has about 14 projects are planned with approximately 650 villas is expected to participate in the market within the next few years. There are about 20 projects in the future with about 9,300 apartments will be in the market within 5 to 7 years.

2. Demand sources
- Growth rate of credit and monetary mobilization
Estimated to 31 / 7, the total payment means increased approximately 13% compared to 12/2009; credit balance was estimated to be over 1.3% respectively and approximately 13% of total deposit balance customers at the end of the credit institutions in July was estimated to be 0.86% and 14.39%.

However, notably in the total credit balance of approximately 13% above, for loans in USD is only up about 1.3% over the previous month and about 8.4% from 12/2009, but credit re-use of excess foreign currency in both relative comparison, estimated to increase 1.6% over the previous month and increased to 34.4% compared to September 12/2009.

While mobilized in USD in July estimated 1.1% increase over the previous month and increased 19.4% compared to 12/2009, while the mobilization of foreign currency decreased 0.25% from the previous month and decreased by 2.4% compared with 12/2009.

- The rate of population growth and urbanization
Population growth rate of about 1.06% and declining each year. The trend of increasing urbanization rate than 3% per year to create a burden for the old city. Most people have hope for a brighter future, a better life.

3. The price of a number of areas in HCMC, Hanoi, Da Nang
- Hanoi:
The average selling price elementary of projects ranging from apartments to sell 800 USD - 3,500 m2. The average selling price elementary of projects ranging from villas to sell 1.800 USD - 4.600 m2.

- Ho Chi Minh City:
The average selling price elementary of projects ranging from apartments to sell 600 USD - 1,800 m2. The average selling price elementary of projects ranging from villas to sell 1.500 USD - 4.000 m2.

- Da Nang:
The average selling price elementary of projects ranging from apartments to sell 750 USD - 3,000 m2. The average selling price elementary of projects ranging from villas to sell 800 USD - 3900 m2.

III. Analysis and Evaluation
- Analysis:
GDP growth rate of 6.5% in may this year and the amount of remittances increased over 30% is a good precondition for development of real estate but the trade deficit to 8.1 billion dollars in eight months and no signs of reduced pressure on rates due to large foreign exchange reserves are no longer much of Vietnam would lead to increased production costs due to increased imports of materials.

In terms of supply and demand for more plentiful supplies in major cities while the domestic savings rate is around 27-30% speed increase with the solvency requirements for properties is still too far away from the main speed up the supply of real estate in the future. In addition, population growth and urbanization growth rate compared with the supply of real estate is big difference. In addition, tightening credit policies property would make it more difficult for the demand source.

- Assessment:
With factors such as macro and micro from now on according to VTID GROUP in 2011, the apartment and housing market which put to use immediately with the medium price will remain the focus because demand is consistent with liquidity and in real demand. Deluxe apartment and raw land market areas in the country would be pretty quiet.

In the long term, with a plentiful supply and demand have limited liquidity and the cash flow without further FII, FDI flowing into real estate market as well as the trade deficit continues to remain high, the real estate market will be rapidly saturation and declining.

- Recommendation:
The above analysis and assessment of VTID GROUP is for reference only. We do not bear any responsibility whatsoever for the consequences that may occur by using information of the article.