1.     Tight credit

The Government issued Resolution No 11 on February 24 to control inflation and stabilize the economy, pursuant to which the State Bank of Vietnam issued Directive No 01 to tighten credit and reduce credit growth in non-productive sectors in 2011, including the real estate sector. Those measures had a great impact on the real estate market by cutting off the access of both builders and buyers to financing.

2.     Plunging prices

The greatest impact on the real estate market from tightened credit was reduced liquidity and a higher incident of default on debts. The reduced access to capital also caused demand for real property to fall. From April to June, the price of land in Ha Noi dropped and the developers of some projects, including the Kim Chung Di Trach, Geleximco Le Trong Tan, Van Phu and Van Canh developments, cut prices by 20-30 per cent.

In October, PetroVietnam Real Estate Joint Stock Co cut the prices of its flats by 35 per cent, and Construction Private Enterprise No 1 in Ha Noi followed suit, reducing the prices for apartments in its VP3 Linh Dam and CT 6 Xa La projects by VND5-7 million (US$238-333) per square meter.

3.     Rising defaults

The year saw a series of default by land traders, which had borrowed at high interest rates and then were unable to refinance. Real estate investor Nguyen Thi Cuc of Phu Xuyen District in Ha Noi borrowed VND250 billion ($11.9 million) with interest payments of VND10 billion ($476,200) per month to invest in housing around Ha Noi. A couple, Bui Thi Quyen and Ta Viet Quang of Dan Phuong District in Ha Noi, borrowed VND200 billion ($9.8 million) and had to shoulder a daily interest of 0.25 per cent. Nguyen Thi Dau of Ha Dong District borrowed VND150 billion ($7.1 million) and faced interest payments of VND4 billion ($190,500) per month.

4.     Government approves Ha Noi master plan

In July, the Prime Minister approved the master plan for Ha Noi through 2030, with a vision to 2050. Under the plan, the national administrative and political center would continue to be located in Ba Dinh District. Headquarters of some ministries and sectors would be moved to the My Dinh and West Lake areas but not to Ba Vi as had been previously expected.

Ha Noi would have five satellite towns in Hoa Lac, Son Tay, Xuan Mai, Phu Xuyen-Phu Minh and Soc Son. Experts estimated that the plan would require total capital of VND300-400 billion ($14.3-19 million) to implement.

5.     Major infrastructure projects

The Government approved major projects to build Long Thanh International Airport in the southern province of Dong 5 Nai at an estimated cost of US$10 billion and the Cat Linh-Ha Dong urban railway line to connect the center of Ha Noi to Ha Dong at a total cost of VND8.77 trillion ($417.6 million).

In HCM City, the VND2 trillion ($95.2 million) Thu Thiem Tunnel was open to traffic on November 20, completing work on the East-West Highway, a 22km expressway allowing HCM City to be traversed in under 30 minutes.

But 2011 was also the year of complaints about slow progress on infrastructure projects and the rapid and severe deterioration of many brand-new highways, including the Trung Luong-HCM City Highway, Thuan Phuoc Bridge, Thang Long Avenue and Thang Long Bridge.

6.     Conflicts in the luxury apartment segment

The luxury apartment market ended the year in a flurry of lawsuits as projects weren’t finished or delivered on schedule and residents complained about high service charges.

7.     Foreign investment declines

This year was marked by a significant decline in foreign direct investment into the real estate sector, which fell to its lowest level in the past five years. FDI in the sector totaled $23.6 billion in 2008, $7.6 billion in 2009, $6.8 billion in 2010 and just $852.6 million in 2011, with the declining trend attributed largely to a lack of access to financing.

8.     Low-income housing goes begging

Tight credit regulations included an exception for developers willing to build low-income housing, but the resulting failed to find buyers. In Ha Noi, auctions held to sell low-income units were unable to attract bids, due to a still-high initial price of VND13 million ($619) per square meter and a lack of reasonable financing terms for low-income buyers.