Since emerging in the late 90s, the modern condominium sector in HCMC has witnessed the typical ups and downs of the development process. The real estate market has been feverish at times with many homebuyers flocking to certain property projects to make deposits in the hopes of earning a certain profit margin. The market has been through periods of hibernation with investors not seeing profit potential or else getting into deep debt because of their investments. This can be seen in the current half-asleep market which has witnessed a significant decline in transactions over the last year since it was hit by the credit tightening policy from the Government.However, some experienced property experts, who have watched the market from the beginning, have drawn a lesson from the market’s development saying it repeats two and four year cycles. They have projected that the property market will witness another boom next year, regardless of its current idleness.

“Next year will start a new cycle of property market development, thus it will kick off another boom,” said Nguyen Cao Tri, CEO of Ben Thanh Land, who was a key speaker in a seminar called Trend of Vietnam Market in 2010 which was held by CEO Club in HCMC at the five-star InterContinental Asiana Saigon in downtown HCMC last week.

Tri told the seminar of CEOs and executive managers the local property market had boomed in cycles and gone into hibernation in the same way. For example, the market experienced its first fever in 1993-1994, then went flat in 1998-1999 before kicking off another boom. The property market turned rosy again in the early 2000s and then developed strongly in 2006-2007 when many individual investors lined up in front of developers’ offices in the early morning, jostling each other to deposit for a property.

Tri said land prices would probably be adjusted next year by the Government who would apply a one-price policy to every sector.

He explained that many state run real estate companies which are holding lots in the city have been offered low prices for many years. With the would-be adjustment, developers have no choice but to factor the increased costs into output product prices. As a result the market will feel more pressure.

Commenting on the coming trend, some property experts said project developers could not make market for their apartments and they were holding out in the current tough times and anchoring their development to the promise of next year.

Responding to a question at the seminar about the surplus and low liquidity of the luxury condo segment and the good sales of the mid- and low-cost segment, Tri agreed that according to market feedback, the mid- and low-cost condo segment, thanks to its liquidity, was meeting homebuyers’ budgets. He said that following the 20%-80% theory representing market potential, many developers were inclined to target the major segment. However, when there were so many people eyeing the 80%, there would be less room for participants. Thus, the narrowed 20% segment would be more attractive and should be considered for investment.

Tri echoed other experts saying the real estate market was competitive, risky and required a big amount of money and developers had to predict the market to tailor their products to customer demand.

“In property investment, sometimes when you see the trend of the market it is too late to invest because of many reasons, among them procedures for a construction license is a problem. You should be prepared for that,” he advised the seminar, alerting investors to the risks.

Tri took his own company’s example to prove that Ben Thanh Land was given two land lots to develop two downtown office buildings in the 1990s. Both projects were carried out at the same time, but only the one on Nguyen Hue Boulevard came online with the office building Sunwah as seen today. The other, on Me Linh Square, whose site clearance is completed, has been nothing but fenced in land for nearly 18 years.

The road seeking approval from the municipal authorities for construction was lengthened because of several adjustments in design requested by the management agencies and the economic downturn. Tri said the difficulty for project developers was not capital but policy, for they often have to wait two or three years for a construction license. Once receiving it, business opportunities are often gone. That is a risk property developers must take.

The market research company CB Richard Ellis Vietnam (CBRE) said in a recent statement that more projects would be launched in coming quarters. As the dust from the global economic crisis begins to settle, some developers are testing the waters by basing initial prices for new launches on real development costs instead of their own, sometimes unrealistic expectations and benchmarks with other projects.

CBRE says both buyers and developers will be waiting to see if the market stabilizes at the new lower price points or begins to edge upward, and if so, at what rate. Few expect a return to the frenzied increases seen in 2007 and early 2008.(Saigon Times)