Many research reports also clearly show a supply and demand imbalance in the high-end home market due to a fall in demand and increase in supply. (Photo: vneconomy.vn) HCM City (VNA) - The housing market is facing an oversupply of high-enddevelopments, detracting from the market’s attraction to investors, Minister ofConstruction Pham Hong Ha has said at a meeting with the Prime Minister’sworking group recently.
There is enoughluxury housing to last until 2020, he said.
Many researchreports also clearly show a supply and demand imbalance in the high-end homemarket due to a fall in demand and increase in supply.
Some have estimatedthe inventory at around 200,000 high-end homes in the period from 2011 and2015, and this figure has now increased significantly.
Another report saidin the last three years the market added 50,000-60,000 apartments a year.
Incompletestatistics from the Vietnam Real Estate Association show more than 4,000projects with a combined area of 460 million square metres, which is equivalentto 3 million apartments.
In HCM City, in 2016and 2017 the market added over 30,000 housing units, of which high-end homesaccounted for 20.3 percent, according to the Ho Chi Minh City Real EstateAssociation (HoREA).
Market observerssaid though the supply of luxury housing increased sharply, demand fell accordingly.
According to aSavills Vietnam report, there was a 31 percent decrease in demand for luxuryapartments in 2016.
HoREA said in thefirst two quarters of 2016 sales of apartments in the city, mainly high-endhomes, dropped by nearly 45 percent.
Like many othermajor markets in the country, HCM City is also facing many other problems inaddition to the oversupply of high-end apartments, one of which is the shortageof low-cost social and commercial housing.
According to Tran NgocQuang, General Secretary of the Vietnam Real Estate Association, in recentyears developers have focused on luxury housing while 70 percent of the demandhas been in the medium- and low-priced segments.
In recent yearsinvestors have vied with each other to invest in the high-end home segmentwithout paying heed to the market demand, expected a significant increase inbuying by foreigners and overseas Vietnamese following changes to the ownershiplaws and policies.
But it has turnedout that the number of foreigners and overseas Vietnamese seeking to buy homesin the country is not as high as expected. Besides, some recent changes tocredit policies by the State Bank of Vietnam have hit demand from speculators.
Circular No.06/2016/TT-NHNN, which came into effect on January 1, has raised the risk indexfrom 150 (the lowest level) to 200 percent, making investors worry about a cashcrunch.
The circular alsospecifies a roadmap for the maximum ratio of short-term funds used for medium-and long-term loans to be reduced from 60 percent to 40 percent, which has madethe banks cautious about pumping money into the real estate sector.
These are expectedto make the lending interest rates less attractive for home buyers, and so manyinvestors do not want to further put money into real estate products,especially luxury ones.
This has resulted inan oversupply of luxury homes, raising the spectre of bad debts as developersstruggle to sell.
According to CBRE,in recent times more than 60 percent of apartment buyers are speculators, withthe majority depending on bank loans for their funding.
HoREA revealed thatloans given for developing and buying property last year were worth around 150trillion VND, a year-on-year increase of 14.2 percent.
The bad debt ratioin the sector averaged 3.9 percent.-VNA
VNA
