Vo Dinh Quoc, Director of the Real Estate Supermarket at the Asia Commercial Bank (ACB), said: “It is difficult to forecast the real estate market in 2006 because there are so many factors, although some difficulties have been solved.”

However, he warned that in a market frozen ‘to the marrow’ for two years, with imbalances between supply, demand, sales and capital, many firms will “die”. Real estate prices in HCM City, he said, may fall in the areas with virtual prices, like Tran Nao Road in District 2 and Nguyen Van Linh Street in District 7. “Without a buyer, high prices will have to fall to be suitable to the market. In general, real estate prices will not change,” he added.

Pham Huy Thuong, General Director of the Hanoi Infrastructure Development Company also revealed that the price of apartments in Hanoi in 2006 would not reduce because many property owners may lease if they don’t occupy apartments themselves. But houses in Hanoi would see prices drop if they don’t have a favourable position for business, Thuong said, and many landowners are hurriedly selling, even at the break-even prices.

Potential homebuyers are also choosing to wait and see whether real estate prices fall in 2006. “I want to wait for several months more because housing prices may reduce,” said Nguyen Dinh Phu in District 12, HCM City, who decided to lease a house rather than buy.

The Price Control Department at the Ministry of Finance (MoF) has recently reported the not-so-welcome news that value is indeed dropping and there are few transactions. In Hanoi, the real estate centre of ACB had no successful transactions for a month and in the last month of 2005 there were only six to seven real estate transactions at the centre, compared to 30-35 per day in previous years. Further, though ACB’s real estate supermarket in HCM City sold 311 houses in 2005, overall property value reduced compared to 2004. “The figure shows that the value of each house reduces,” Mr Quoc added.

“It is easier to sell houses of lesser value or land of a small area,” said Lam Van Chuc, adding, “adversity brings wisdom.” Landowners may split their large houses into smaller ones in order to sell. Nguyen Van Tam in Dinh Cong Ward, Hoang Mai District, Hanoi offered for sale his 80sq.m plot of land for three months and still couldn’t sell. But when he split the plot into three smaller plots, he immediately had buyers.

According to surveys, 35.4% of real estate buyers prefer apartments at new residential areas but prices on those apartments are still high for the average income in Vietnam. Yet analysts don’t expect prices to fall anytime soon and say that the new land price framework has almost no influence on the real estate market because it has not been used to fix real estate prices for the past year.

Deputy Minister of Natural Resources and Environment Dang Hung Vo said that land prices defined by provincial and municipal People’s Committees are at 50-70% of the market prices, which need to drop. Rates in the current framework are VND180,000 - 250,000/sq.m while the real prices are VND1.8 - 2.5mil/sq.m.