In a recent market report, property services firm CBRE Vietnam highlights the pain being felt in the Vietnamese economy, especially by real-estate developers and investors, as the State Bank of Vietnam tries to combat inflation by limiting non-productive loans.

With demand falling short of supply, a proportion of developers and investors are beginning to experience cash flow issues, it says.

CBRE's head of research and consulting in HCM City, Adam Bury, says: "After years of lending to the real-estate market, the country is now at the point where the SBV is considering the consequences of this on the economy.

"Where capital is no longer available from Vietnamese banks, some within the real estate industry must find alternative methods of financing or appropriate exit strategies for some of their projects."

Marc Townsend, managing director of CBRE, is, however, upbeat: "The long-term potential for real estate remains bright despite any of the current issues. Vietnam is still in the infancy of its growth.

"With a low level of urbanisation and an increasingly wealthy and young population, Vietnam is well positioned for the future. The long-term potential for real estate, therefore, remains bright," Marc added.

The report cites two particular examples-industrial production and tourism.

The country is becoming a home for manufacturing and exporters who are looking to capitalise on skilled but relatively cheap labour. This is providing a genuine China+1 opportunity for companies who are looking to diversify risk. The strength of the Vietnamese industrial market is such that at the end of 2010, there were over 180 industrial parks, with another 80 under planning. With the opportunity in the industrial market, it is likely that continued investment into the sector will be seen.

The tourism market is another excellent growth opportunity for Vietnam, which could be described as a "Thailand+1" scenario. Developers, hotel operators and others in the sector have the ability to take advantage of a country with a rich history, plethora of geographically diverse destinations and a growing number of visitors. Last year saw a 19.2 per cent rise in international visitor numbers to HCM City.

With infrastructure improving-such as the new international airport in Da Lat that is already open and the improvements that are being made to Da Nang International Airport-it is likely that tourism numbers will continue to increase for years to come.

Bury, however, notes that openings for new entrants or for those looking to expand their existing real estate operations have been few and far between in the past couple of years.

In a market dominated by close personal connections, he believes that the next 12 months will provide fresh chances for well-priced opportunistic plays.

"Historically, opportunities for direct real-estate investment have often appeared over-priced, limiting the amount of transactional investment activity in the market.

"With the current tightening of credit for developers and investors, we believe that the next year may present well-priced prospects for investors looking to tap into Vietnam's growth potential.

"In addition, the increasing sophistication of some Vietnamese developers and the small amount of international funds already provide a realistic indirect investment possibility."

With the country's economic growth set to continue, there is notable long-term demand for real estate, he reveals.

Any pain that the property industry is feeling is therefore a consequence of the immaturity of the market and the cycles that are evident in any property market, he says.

Draft decree drives gold price

World gold prices fell almost $18 per ounce last Thursday, but in Vietnam they have remained high. The reason-the draft decree on bullion gold trading that was unveiled by the State Bank of Vietnam last week.

Gold trading companies like PNJ, SBJ and SJC all reported increased trade. "As people's worries on gold bullion trading limits lifted, the market warmed up immediately," said Nguyen Thi Cuc, deputy general director of PNJ.

The decree, which will guide management of gold bullion trading if approved by the government, allows investors to both buy and sell gold from banks and authorised businesses.

The bank had been toying with the idea of allowing people to sell gold bullion but not buy.

Now people can buy gold for investment purposes but no longer use it as a means of payment.

The central bank is, however, set to slap other restrictions-the number of institutions allowed to trade bullion will be reduced through stringent capital, revenue and network conditions.

Gold jewellery trading will also become contingent on factors like business location and the availability of facilities and equipment.

There are now around 10,000 gold shops, most of whom are also involved in making jewellery.

Nguyen Thanh Long, general director of SJC, the country's largest bullion producer and trader, complained that the draft did not spell out the conditions to be fulfilled, like capital and the revenue, for a bullion trading licence.

"Other open questions include who will be eligible for gold import and bullion trading," he said.

He agreed, nevertheless, that the draft has relieved people's fears.

He wanted the Ministry of Industry and Trade to join the central bank in managing the jewellery industry to better pilot its growth.

He also wanted the much-awaited gold exchange to be set up soon to hedge risks.

Keeping an eye on State firms

A regulation on monitoring State-owned firms' finances, which has been drafted and will be sent to the government for approval, will take effect in the third quarter, the Ministry of Finance's Corporate Finance Department says.

The regulation, on which opinions are being solicited from concerned parties, will evaluate the firms' actual performance and increase their accountability in managing capital and other assets.

These institutions currently own around 70 per cent of the country's fixed assets and account for 60 per cent of the State's investment. They also utilise 70 per cent of ODA funds.

Areas that will be covered under the new regulation include business projects as well as portfolio investments, debt management and repayment, capital preservation and growth, and return on State-owned capital.

Firms in which the State does not have a majority stake will be accountable for fluctuations in chartered capital, business projects and transfer of high-value assets.

Special financial monitoring will be undertaken of firms in poor financial shape-described as that suffer losses and have debts three times their capital or losses equivalent to 30 per cent of their capital.

Other firms to come under this category are those violating reserve regulations and falsifying accounts.

More than 20 groups and corporations will be covered by the new regulation. They include the Electricity of Vietnam, PetroVietnam, Vietnam Textile and Garment Group, Vietnam Airlines and State Capital Investment Corporation.

Tuoi Tre - June 28, 2011

High-end property developers undeterred by slowdown

Despite slow sales in the high-end property sector, many real estate developers are still launching new projects.

Interest rate support, flexible payment terms, lucky draws and discounts are among the multiple incentives developers are offering to attract customers.

One determined developer is Khang Dien Housing Trading and Investment Joint Stock Company which on Saturday started marketing its luxury Goldora Villa project on Lien Phuong Road in Phu Huu Ward in HCM City's District 9.

This project covers some eight hectares with 119 villas, with prices starting from 6.5 billion dong per unit.

Ly Dien Son, general director of Khang Dien, said the company had decided to launch the project to assert its business development strategy in spite of current challenges and that the company had received feedback from the market ever since it launched its Villa Park project which is near the newly launched project.

Villa Park is jointly developed by Khang Dien Co and Prudential Vietnam Fund Management Co, a Prudential subsidiary.

It has 213 villas and garden row houses and serviced utilities such as swimming pools, Jacuzzis, barbecue gardens, sport clubs, tree parks and a kindergarten.

A VND1.5 trillion has been allocated for the first phase of the residential project.

Dien said some 60 villas in the first phase of the Villa Park project were sold with prices ranging from three billion dong to nine billion dong a unit, which encouraged the developer to move on with its second villa project in the area.

In another development in the same area, VinaCapital Real Estate Company is pressing ahead with a plan to launch a residential project later this year after it saw success in its first project nearby.

David Henry, managing director of the company, said the company would invest some $40 million in the Garland 2 project with 72 villas and four condominium towers.

The firm is expected to get positive feedback from the market as seen in the Garland 1 project whose 53 villas have been snapped up.

The high-end segment on Saturday saw the Singaporean property company Keppel Land Limited and its local partner Tan Truong Company launch their mixed-use development in HCM City's District 7.

Some 193 apartments in its Riviera Point project along the Ca Cam River in District 7 are offered from 30.7 million dong (US$1,460) per square metre.

The $200 million project has 18 residential towers with a total of 2,400 apartments of two to four bedrooms.

Like other projects, it has spaces for retail shops, food and beverage outlets, and recreational facilities. As planned, the first phase of this project with 549 apartments will be completed by 2014.

Linson Lim, president of Keppel Land International for Vietnam, Thailand and the Philippines, agreed that the current residential market was tough for all developers.

However, the Singaporean company has a long-term development strategy in Vietnam where it expects to overcome challenges in the near future.

Flexible payment methods

While a number of developers look optimistic, many others are struggling to do all they can to lure buyers with various incentives.

For example, Novaland Company has started up a free-staying programme to get buyers' feedback for its 39 apartments in the Sunrise City project in HCM City's District 7.

In the programme, the buyer will place a deposit equivalent to 20 percent of the total value of an apartment when they sign a contract.

The buyer then will make an additional payment equivalent to 60 percent to take the apartments. They are eligible to stay in the apartments for two years without paying a fee.

After two years, they will pay the remaining 20 percent if they want to buy the apartments. If they don't, they can return their apartments to the company and take back their deposits together with the interest.

For its part, Phat Dat Corporation allows buyers to pay in 48 installments in its EverRich 2 condo project in District 7.

Instead of fixing a payment schedule, the company is willing to design a payment method that fits each buyer's monthly income.

The first required deposit is 10 percent of the total value of an apartment and from the second to 47th payment, the buyer will pay a mere 1.3 percent at a time.

The company calculates that for a 2.5 billion dong apartment, the buyer can pay about 40 million dong per month.

The amount of payment is believed to suit the income of a young family.

Tuoi Tre - June 28, 2011