In Vietnam, many owners of condominiums in building complexes in Hanoi have been involved in lengthy disputes with the management over disagreements involving service charges. The Ministry of Construction in Vietnam has now had to issue a guide code, setting maximum levels for the service charges.
In the case of condominium service charges, after calculating correctly, the fees were higher than the service charges put forth by the Hanoi People’s Committee. The final amount must be agreed upon by more than 50 per cent of apartment residents and more than 50 per cent of board members.
The main issue currently arising in Phnom Penh is the implementation of a committee for the true co-owners within developments. One of the main issues is the developer retaining control of the property’s management. Often a company linked to the developer is appointed to manage the property, thus making a profit from the co-owners, even though the true owners of the building have not agreed on the appointment.
Cambodia does have laws in place that state that co-owned buildings should have a committee set up to address such issues involving management. However, the law doesn’t state when a committee should be set up, leaving co-owners with a certain lack of control.
In the West it is common practice for co-owned buildings to have committees making key decisions on management issues. The service charges often reflect day-to-day running costs, but also a sinking fund for future maintenance requirements, easing the burden on co-owners when expensive defects arise in common areas. In Phnom Penh, due to the infancy of the condominium market, sinking funds are not being set up. In the future this could become a problem for co-owners. Low service charges may seem attractive initially, but if an inexperienced management company is in place, budgeting will be inaccurate, leaving the investor out of pocket in the long run.
Meanwhile, the prices of apartments in Hanoi continued to decline in the third quarter of this year, reflecting the prolonged stagnation in the city’s real estate market.
CB Richard Ellis Vietnam’s third-quarter report on the Hanoi property market showed similar trends. “Secondary asking prices continued to drop by 5 percent quarter- on-quarter to an average of about $1,730 per square metre, following a downward trend that started in the last quarter of 2011,” said CBRE executive director Richard Leech.
Developers have been revising business strategies in terms of target customers and the types of products offered, putting greater efforts into sales and customer service and showing a willingness to compromise on prices and payment structures, he said.
“Looking ahead, in the current buyer’s market, the buyers’ purchasing power and mentality will drive the market recovery,” Leech said.“ A dim economic outlook through to 2013 will further dampen buyer confidence, and the flight to safety will strengthen savings at the expense of investments.”
Phnom Penh condominium prices remain stable and sales figures for new developments have been good.
The city is starting to see an influx of supply, with a number of new condominium developments entering the market. Investment is still largely driven by speculation into up-and-coming areas. Phnom Penh is currently lacking a high-quality completed condominium development in BKK that would attract investors with a good rental return.