Vietnam’s property market rebound from a three-year slump may be delayed until 2015 as families struggle to access affordable loans and confidence lags. Declining home values hurt Vietnamese sense of wealth. When that drops, people reduce their spending, which ripples across the economy.
First-quarter home sales reflect difficulties in a property market where entire subdivisions on city outskirts remain unfinished and empty.
Only 1,500 condominiums were sold in Hanoi in the first quarter, according to CBRE. While that’s a fivefold increase from the 279 sold in the same period two years ago, it’s still down from the peak in 2009, when more than 15,000 units were sold in the capital city. In Ho Chi Minh City, first-quarter sales more than tripled to 2,263. That’s compared to a peak of 13,000 condos sold in Ho Chi Minh City in 2010.
“We’ve still got issues that are holding us back,” Richard Leech, Hanoi-based executive director of CBRE, said in an interview. “Although we have had economic stability, there is a lack of confidence, a fear that interest rates are going back up.”
The economy continues to be stymied by bad debt at banks, of which a third were tied to soured property loans at the end of 2012. Lenders are putting together a loan package to stimulate the property market and policy makers cut interest rates last month to bolster growth.
The World Bank estimates the economy will grow 5.4 percent this year, a seventh straight year of growth below 7 percent.
“Most people’s wealth is tied up in real estate,” McCarty said. “They are seeing their wealth go down on paper about 30 percent in the last few years. A lot of people have debts. There is a lot of stagnation.”
Just a few years ago, ordinary Vietnamese were “gambling” on apartments, putting down deposits with plans to resell the units in a month or two, he said. When the market slumped, they could not sell the homes.