No sooner had Vietnam weathered its own financial crisis in early 2008 than it came under pressure from the global crisis. In terms of the economy, we now predict growth of 4.5% in 2009. GDP grew an estimated 3.1% y-o-y in Q109 following a revised 6.2% expansion in 2008. While the economy is likely to continue to suffer, we feel Q109 may have been the bottom of the current downturn. Heavy monetary and fiscal stimulus measures are now gaining traction. Nonetheless, we expect the recovery to be very gradual in nature, and are forecasting GDP growth of 5.5% in 2010. The Vietnamese parliament has approved the government's decision to reduce the 2009 growth target from 6.5% to 5-5.5%. The IMF revised its 2009 GDP growth forecast downwards from 4.8% to 3.3% in early May, while the Asian Development Bank is now expecting growth of 4.5% and 6.5% in 2009 and 2010, respectively. The real estate market in Vietnam has been hit by international events, but the picture remains mixed. In our previous report we had noted that surging demand for real estate in both office and residential sectors during the earlier crisis was a sign of how weak supply really was. Undoubtedly those fundamentals remain, but are obscured by the damage from the global recession. There was no new Grade A office supply in Q109, according to Savills, and average rents saw a significant decline of 19% quarter-on-quarter (q-o-q). Evidence suggests that office rents in Q209 may be down 50% year-on-year (y-o-y). Lower grade property has been more severely affected. The total supply of office space in Ho Chi Minh (HCM) City in 2011 is set to grow more than 120% compared with the end of 2008 (910,000m2) and rent rates are falling, according to some sources. Savills says that the main growth areas for new office buildings in HCM City are in suburban areas such as District 7, Binh Thanh and Tan Binh. According to the Foreign Investment Department under the Ministry of Planning and Investment, the first four months of 2009 saw 91% of the US$6.36bn FDI inflow into Vietnam heading for the real estate sector. The picture emerging from the residential sector is brighter than for the office sector, although activity has been muted. The rally in international stock markets has also begun to settle sentiment, however, and that may receive a further boost from some clarification of foreign property rights.
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