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Kal Vaughan
Kal Vaughan
  • 1 Minute Read
  • 27th November 2012

Vietnam’s property markets slump

Commercial property rental values in Vietnam’s two largest cities have slumped, reflecting the slowing economic growth of the country and the excess of office space on the market.

In 2011, four times more space was brought onto the Hanoi market than all of the previous four years combined, according to property broker CBRE.

The rate was 11% lower than its 2009 record of $47sq m in the third quarter of 2012, according to data from the Vietnam unit of CBRE.

The dropping rate reflects a period of loose lending by the governments’ state-run banks, who were responsible for issuing the loans that saw many new builds come onto the property market.

Many now lie unfinished, without sufficient demand to pre-let the property, subsequently leading to many projects floundering in the construction stages.

A prime example of this is Hanoi’s EVN Tower, which from afar gives a very different impression to its rubble-strewn entrance and missing windows. Derelict features have unmasked the reality of Vietnams failing property market, a signal that bad debts and loose lending have finally taken their toll.

Grade B office space rates fall dramatically:

In the capital’s western district and central business district, rates have fallen by 39% and 22% respectively from their 2009 peak.

Son Nam Nguyen, managing partner at Vietnam Capital Partners, an investment bank in Ho Chi Minh City said: “I have never seen rents decline this fast in the market”.

“If real estate rents and values continue to decrease as we’ve seen in the past three months and six months, the biggest risk is that we will see developers walk away from projects and banks’ bad assets will increase very rapidly.”

In other Southeast Asian news, SOS reported last week that Hong Kong property markets were facing a ‘false dawn’, with its speculative bubble set to burst.