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The Vietnamese city of Ho Chi Minh City will see rising demand for its office space next year as the impact of relatively low supply feeds through into the market, according to the global advisory firm CB Richard Ellis (CBRE).
Experts on the local property market have said they expect to see prices fall during the final months of this year but demand is tipped to increasingly out-strip supply as 2012 unfolds.
Marc Townsend, managing director of CBRE’s Vietnamese operations, explained in an interview with Bloomberg that new office developments in the city are not currently being financed on the scale of recent years as demand and rental rates have declined.
“The decline in rents is very painful for people who borrowed large amounts of money to develop property over the last three years,” Townsend said. “But we don’t expect to see many new projects because very few banks will look at loans now for property.”
He suggested that Ho Chi Minh City, Vietnam’s largest city, should see a decline of roughly 5 percent in its office space prices before their slump is over, which should help the city compete more effectively for investment with some of its main rivals in the region, including the likes of Bangkok and Jakarta.
There was a major rush to develop new office space buildings in Ho Chi Minh City in the years prior to the 2008 financial crisis but the final few projects commission during that time are poised to come on to the market.
CBRE’s latest figures suggest that the typical asking price on offices in Ho Chi Minh City during the third quarter of 2011 were between 7 percent and 9 percent lower than those being proposed in the same period a year ago.
Ho Chi Minh City used to be known as Saigon and it is the driving force behind the Vietnamese economy, which the International Monetary Fund recently predicted will grow by 6.3 percent over the course of 2012.