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| A motorbike passes by the condo project Thuduc House Apartment in HCMC’s Thu Duc District. The developer has been encouraged by a good run of sales there - Photo: Dinh Dung |
The times have changed in the property market from two years ago when buyers would rush to buy up what ever was available at new housing projects.
“The market is changing, and developers have no choice but tailor their products to suit the market demand,” Do Thi Loan, general secretary of the HCMC Real Estate Association (HoREA) said.
Another change over the past few years is that prospective buyers want to see the finished product now before they invest their money, instead of just seeing the plans.
Like the office market where oversupply has forced landlords to offer incentives to woo tenants, the condo market is witnessing a strong increase in supply, making sales hard.
Hugo Slade, associate director of Cushman & Wakefield Vietnam, told a seminar that the significant increase in supply had given homebuyers more options.
The commercial real estate consultancy company’s studies showed total supply for the first eight months of this year was around 11,200 units, of which the affordable apartment segment accounted for 76% of the total supply. Districts 2 and 7 had the most new units with nearly 2,000 and 1,900 units respectively.
Some 46 condo projects totaling some 8,500 units were launched in the last eight months, with prices ranging from US$780 to US$810 per square meter. The company, however, reported that the market demand remained low in all grades. The uptake rate of the grade A segment was 14%, grade B segment was 17% and grade C was around 20%.
Slade attributes low take-up rates to prices that don’t match what homebuyers can afford and fewer chances for speculation. In addition, unrealistic loan criteria for end-users were another discouraging element.
The newly issued Decree 71/2010/NDCP designed to curb speculation; gold price increase and the exchange rate fluctuation between dollar and dong were also depressing factors for individual investors and speculators.
Challenges but chances
With outlooks tinged with difficulties in financial support because of stricter loan procedures, high interest rates and the current wait-to-see sentiment, the property market is expected to flounder through the abundant supply in the years to come. According to research by Savills Vietnam, there are some 28,500 apartments still in planning that will complete before 2012.
Many developers still have a positive outlook, saying that although the market has experienced difficulties for years, it would soon pick up and return to its cycle of development given the country’s positive trend of recovery.
Nguyen Vu Bao Hoang, deputy director of Thu Duc Housing Development Corporation, or Thuduc House, said the young population and fast urban development is creating a huge housing demand. Developers, who choose a segment in the residential market and design their product tailored to suit it, would be most likely to prosper.
Like other developers, Hoang is confident in the market development, saying the improvements to infrastructure and road systems shortening distances and travel time from fringe districts to the center of the city are opening doors for affordable and mid-end condo projects, which are often developed far from the central business districts. Therefore, many project developers, who have condo projects with prices below VND20 million per square meter, are going ahead with projects despite a flat market.
For example, Thuduc House had positive feedback when it launched 120 apartments at Thuduc House project, one of five condo projects targeting middle-income earners. All the apartments sold with prices starting from VND15.5 million per square meter within a short time, so the corporation is pressing ahead to launch the second phase this week.
In another project, Van Phat Hung Corporation plans to test the market with some 110 apartments priced from US$1,000 (VND19.5 million) per square meter. The corporation is developing its La Casa condo project on Hoang Quoc Viet and Dao Tri streets, some eight kilometers from the heart of HCMC. When in place in the next five years, the project will provide some 2,000 apartments.
Some other affordable projects southwest of the city are underway and will be ready soon. They include Terra Rosa, Dai Thanh, Tan Tao 1, Carina and Happy Plaza which offer some 600 apartments.
Slade said a more price sensitive residential development trend is taking shape and will continue for the next two years.
He predicts that in the short term, oversupply would put downward pressure on pricing. Reduced travel time would compensate for outer district projects, and suburban residential development would continue to be the trend as a result of high land values.
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