Vietnam property prices to fall further

Bloomberg

Resale prices of condominiums in Ho Chi Minh City, the nation’s main commercial center, have slumped as much as 50 percent since peaking in 2007 and would drop further in 2009, said Marc Townsend, managing director of the agency’s local unit.

Vietnam tightened credit in 2008 to choke off a surge in inflation, restricting funding for businesses and raising interest rates. The economy expanded 6.2 percent in 2008, the slowest pace since 1999, according to data released Dec. 31. "We will see a further softening of condominium capital values, retail and hotel room rates," Townsend said in an interview, without giving precise forecasts. "Multinational companies will move, or relocate, or downsize."

The central bank capped credit growth at 30 percent earlier last year with restrictions for property and securities companies, and raised interest rates to the highest in Asia. The nation’s construction industry stalled in 2008, according to data from the General Statistics Office in Hanoi.

"It was like a tsunami wave, the ability to borrow money easily disappeared," Townsend said. "Money went from expensive to exceedingly expensive to probably unattainable."

There are "hundreds of office buildings" under construction in Ho Chi Minh City and completions next year will boost supply and push rents down further, Townsend said.

Central Bank Deputy Governor Tran Minh Tuan on Oct. 21 asked banks to extend loans to so-called feasible property projects.