M&A activity continues rising in domestic realty market

CA - Since its slide into difficulties four years ago, the local property market has remained challenging for developers as secondary investors have left the market while homebuyers are holding a wait-and-see attitude. The Saigon Times Daily talked to Brett Ashton, managing director of Savills Vietnam, as the company released its fourth quarter report on the property market on Wednesday. Excerpts:

The Saigon Times Daily: As a property services provider with in-depth research into the market, how do you comment on the property market in 2011?

- Brett Ashton: 2011 was a tough year for everyone and it got harder as the year wore on. The interest rate environment along with high inflation meant that developers started to feel the interest pain at the same time buyers of apartments left the market. While this is a fairly normal occurrence in any property market, it has been pretty rare in Vietnam. People think prices will fall, so they wait.

Some people say the housing price is at the bottom, and thus this is a good time to buy apartments for accommodation. However, buyers for some reasons are still waiting for a better chance. What will you tell your customers?

- If you are looking for an apartment to live in long term, now is a great time to buy. You can get good quality products at affordable prices and you can benefit from the incentives from developers. Once people believe prices have bottomed, the market will rebound and those who get in early will benefit the most.

The year 2011 saw some property projects, both office buildings and condos, changing hands, and the M&A activity is projected to become busier in 2012. Do you think this is a good chance for foreign investors to join the property market?
- Foreign investors are a sizable part of the real estate market in Vietnam and will continue to be so. Of course when any developer gets into trouble, they may look to sell assets. There will always be buyers if the price is right, and we expect 2012 to continue seeing M&A activity.

What do developers learn from the market downturn?

- Time will tell if they have learned anything at all. Hopefully it teaches them that they need to know their customers before they build. Design to the market, not to your rich friends, and property development is not easy. Everyone saw a few make big money and jumped in without enough capital and now they are feeling the pain.

Many developers have entered into 2012 with a gloomy outlook, saying they see no light at the end of the tunnel. How do you expect to see the market develop this year?

- Who knows? If interest rates come down and the Government stops treating real estate as a social evil in terms of financing, then perhaps we will start to see a recovery in the late second half of this year. Of course, if interest rates do not drop and the economy continues to suffer, it may take until 2013.