HCM City housing market slows, but may warm up in H2 The sharp increase in the supply plus changes in policies related to the real estate market have led to a considerable decrease in the number of property transactions.   Le Hoang Chau, chair of the HCMC Real Estate Association (HoREA), noted that the housing market proceeded as usual in the first five months of the year, but there were ‘some warning factors’. In January 2016, the State Bank of Vietnam released the draft of the amended Circular No 36 with provisions designed to restrict credit flow to the real estate market. The draft document gave a strong message to investors, commercial banks and secondary investors, forcing them to adjust their business plans to ensure healthy development of the market. In mid-February 2016, many commercial banks raised the interest rates of long term deposits (12 months and longer) to over 8 percent per annum, which means that the lending interest rates may increase by 1-2 percent in 2016. Analysts noted a wave of steel speculation beginning in mid-March, which has also had a direct impact on the real estate market because of higher construction costs. In late 2015, many notarization agencies refused to notarize transaction contracts under which future housing projects and houses were used as collateral because of the lack of guidance from governing bodies. This placed another difficulty for clients to access houses. The sharp increase in the supply plus changes in policies related to the real estate market have led to a considerable decrease in the number of property transactions. Meanwhile, people heard that the State Bank would stop the disbursement of the VND30 trillion credit package which aimed to stimulate demand. The dispute between the real estate developer and residents at Bay Hien Tower in Tan Binh district in HCMC which also a reason behind the weaker purchasing power. According to Savills Vietnam, in the first quarter of the year, nearly 7,500 apartments from 20 housing projects were put up for sale, raising the total supply of the whole HCMC market to 37,500. The figure represents a slight decrease of one percent compared with the previous quarter, but shows an 82 percent increase compared with the same period of last year. A report shows that 6,400 apartments were sold in the first quarter, a drop of 17 percent from the quarter before. Low- and medium-priced houses saw the highest percentage of transactions with the purchasing power up by 8 percent, while high-end products saw a decrease of 32-34 percent compared with the fourth quarter of 2015. Chau from HoREA believes that as the policies become stable, the market would see positive signs in the second half of the year, and investors will pay more attention to small- and medium-size houses with reasonable selling prices. DNSG