Oct. 20 (Bloomberg) -- Vietnam’s property market has “slowed down” as higher interest rates made it difficult for potential buyers to finance purchases, said CapitaLand Ltd., Southeast Asia’s biggest property developer.
The nation’s inflation rate in September reached 22.42 percent, the highest among 17 Asian economies tracked by Bloomberg. The central bank has increased its refinancing rate to 15 percent from 9 percent at the beginning of the year, while Fitch Ratings said in August lending costs for some businesses in July were as high as 25 percent.
Potential buyers “cannot get bank financing,” Yip Hoong Mun, deputy chief executive officer of CapitaLand’s Vietnam unit, said in an interview in Ho Chi Minh City after a presentation at the Vietnam Investment Summit. “A lot of purchasers want to buy but they may not be able to borrow money. So the whole market has more or less slowed down.”
CapitaLand has four residential projects in Ho Chi Minh City and two in Hanoi, said Yip. The Singapore-based company said last year it planned to increase its business in Vietnam from total assets of S$400 million to S$2 billion ($1.57 billion) over three to five years.
Other obstacles include higher-than-anticipated project financing costs, a slow development process, and currency devaluations, Yip said. Measured at official exchange rates, the Vietnamese dong has lost about 7 percent of its value this year.
“They do not have good control of fiscal and monetary policy,” Yip said at the conference. “Inflation has the highest impact. It is a persistent problem for Vietnam, even though the general consensus is inflation will go down after this year.”
The Vietnamese property market now has a “more realistic pricing attitude” for potential projects, the U.K.-listed Vietnam Property Fund Ltd. said last week.
CapitaLand is still seeking investment opportunities in the country because “a lot of landowners or local developers may want to partner with foreign developers like us,” Yip said.
--Jason Folkmanis in Ho Chi Minh City. Editors: Linus Chua, Andreea Papuc
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