Real estate market: slow restart will cause commodity shortage

The prices of construction material have decreased, bank interest rates have decreased, while real estate credit has resumed. Experts say that now is the right time for real estate projects to kick start again, if not, the market will lack commodities in one or two years.

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Most recently, a joint venture of four construction and investment corporations officially kicked-off the construction of a complex of high-rise apartments and services located in Dong Nam, the new urban area on Tran Duy Hung street, in Hanoi.

The construction of such a big complex, with 530 apartments and nearly 30,000 sq. m. of offices, has been drawing special attention from the public recently. Experts say that now is the right time for investors to restart real estate projects after a long period of hibernation.

Prior to that, in the Van Phu new urban area, a real estate project of 2,500 houses was also kicked-off. The investor of the project said that the implementation of the project will still be carried out despite a lot of difficulties in capital mobilization from the public, as the investor does want any more delays.

In new urban areas, like Trung Hoa – Nhan Chinh, My Dinh and Ha Dong Town, a lot of investors have also resumed their projects’ implementation

An official from the Real Estate Association said that it is too early to say that the market has recovered, but the resumption of real estate projects has shown signs of the ‘defrosting’ of the real estate market.

At this moment, investors with big capital will have more advantages than investors who have to rely on bank loans. Though the interest rates have been decreasing, they remain high for investors. Though banks have opened their doors to real estate developers again, investors would still find it difficult to persuade banks to provide large sums of capital.

The market will lack commodities?

Investors believe that it is now the right time for them to kick-off projects, as the prices of construction materials have been decreasing dramatically. The steel price has decreased in half, while the supply of cement has been profuse. Meanwhile, it is foreseeable that the prices of electricity, coal and clean water are expected to increase in the next year, which will affect the construction costs. Therefore, it is considered a wise move to carry out construction right now.

According to Nguyen Quoc Hiep, Deputy Chairman of the Vietnam Contractors’ Association, Vietnam’s real estate market will recover by the end of 2009, before becoming prosperous in 2010. Therefore, now is the right time to speed up real estate projects.

In general, it takes approximately one or two years to implement high-rise building projects. It seems that no big commodity source has been launched into the market in the last year, and if the situation cannot be improved, the lack of commodities is likely to occur in one or two years.

Dang Vy