Abundant supply of high-end apartments, lacking affordable options

The supply of luxury housing products has increased so fast that it has outstripped that of affordable units.
(Photo: VietnamPlus)

Hanoi (VNA) – The supply of luxury housing products has increased so fast that it has outstripped that of affordable units, according to realty experts.

Statistics from the Ministry of Construction show that demand for affordable homes accounts for up to 80 percent of the market demand, but low-cost housing is becoming increasingly scarce in the country. In stark contrast, high-end housing and condominium projects eclipse the middle-end segment in terms of supply.

Vietnam faces shortage of cheap houses

The Market Research Board of Batdongsan.com.vn said that affordable houses in Hanoi and Ho Chi Minh City are the top searches on the website, with the rate in the capital city at 45-46 percent and that in the southern hub ranging 35-38 percent.

Online home hunters in both cities are interested in affordable apartments with and average floor area of 60-70 sq.m, and average price hovering under 20 million VND (853 USD) in Hanoi and 20-35 million VND per sq.m in HCM City.

Five years ago, several cheap commercial housing projects in Hanoi were sold at 13-15 million VND for each sq.m, but now the prices have surged to 17-20 million VND.

Over the past three years, Batdongsan.com.vn has recorded much housing price fluctuation. To be more specific, prices of affordable apartments in Hanoi rose to 19.9 million VND in 2018 from 19.6 million VND two years ago. In HCM City, the prices leapt to 21.9 million VND in 2018 from 18.6 million VND in 2016.

As demand for low-cost realty products has been on the rise, new supply is limited, with customers looking to buy houses at old condo projects which are near the city centre.

Affordable housing projects in Linh Dam and Kim Van-Kim Lu urban areas are the most hunted on Batdongsan.com.vn, with 500,000 and 400,000 searches, respectively.

Vice Chairman and Deputy General Director of Capital House Tran Nhu Trung attributed the undeveloped cheap housing segment to the shortage of preferential credit packages for investors.

As for low-cost housing developers like Capital House, they see the huge potential of the segment; however, they could not arrange capital to branch out affordable projects.

“We need a long-term credit policy to settle the housing issue for low-income earners,” Trung stressed.

High-class apartments prevail in property market

The Market Research Board of Batdongsan.com.vn said that Hanoi and Ho Chi Minh City have emerged as hot markets for luxury apartments.

In 2018, there were 100 million searches for apartments, just behind those for residential houses of 120 million on the website.

The supply of apartments priced from 25 million VND per sq.m and above is dominating the market.

Affordable housing projects in Linh Dam and Kim Van-Kim Lu urban areas are the most hunted on Batdongsan.com.vn.(Photo: VietnamPlus)

Some 30-32 percent of Batdongsan.con.vn’s visitors looked up for superior units in Ho Chi Minh City, doubling the figure recorded in Hanoi.

Senior Director of CBRE Vietnam Duong Thuy Dung said that there is a big gap in the search for housing in the two cities as many investors in the southern hub purchased expensive apartments for foreign rentals. 

However, she said that abundant supply together with low demand will threaten the market’s sustainability. Besides, individual investors’ return on asset will be affected when there are so many apartments area leased out.

The rate of return on rental apartments in HCM City fell from 8 percent in 2015 to 6.5 percent in 2018, and it is expected to dip further if more high-end units are handed over.

More projects to be launched in 2019

Regarding the property market outlook, Dung said that many real estate projects which were postponed from the previous year will be rolled out in 2019, leading to a rise in the apartment supply.

Property absorption rate is expected to reach 80-85 percent, with substantial increases forecast for the price of luxury units, and stability for prices of affordable and mid-range segments.

BIDV Chief Economist Can Van Luc holds an optimistic outlook for the property market in 2019. Foreign direct investment (FDI) flow to the country will keep its momentum going and become a boon for Vietnamese real estate.

Local property is believed to benefit a lot from the escalating US-China trade war as investors are shifting their capital to ASEAN, and particularly to Vietnam’s real estate, to avoid the trade disputes’ impact.

To that end, local property developers and distributers should take this golden opportunity to outline rational investment plans and detailed solutions for their lucrative business, Luc stressed.

He said that high-end apartment and industrial property hold huge potential, while affordable housing stands the chance to develop this year.

Several investors will shift to develop low-cost projects to promote liquidity and enhance cash flow rotation. As a result, the market will see the availability of more suitable realty products.

Luc recommended investors pay due attention to construction quality, product safety, and professional management.

Meanwhile, General Director at Batdongsan.com.vn Nguyen Quoc Anh pointed out that industrial property will thrive this year, therefore the realty market will not only become more vibrant in Hanoi and Ho Chi Minh City but also in satellite cities and areas in the vicinity.

“Especially with the Comprehensive and Progressive for Trans-Pacific Partnership (CPTPP) coming into force in 2019 and manufacturers moving their production to Vietnam to avoid sanctions from the US-China trade war, we can expect the land lot segment to further develop next year”, Anh said.–VNA