Markets & Prices

Last updated: Wednesday, May 15, 2019


Flats in Dilemma

Posted: Monday, May 21, 2018

Selling apartments has never been easy for real estate developers in Vietnam. And, in 2018, selling pressures are on the rise.

The apartment market was very vibrant in the first quarter of 2018, although there was the long Lunar New Year holiday and buyers are usually uninterested in buying property during this time. According to CBRE, supplies increased sharply from a year earlier. The absorption rate remained high, especially in new projects. However, average primary prices witnessed a slight decrease on stronger focus on the mid-end segment and concerns about safety issues emerged in during the quarter.

New challenges to the market
According to CBRE survey, in the first quarter of 2018, the Ho Chi Minh City market welcomed 9,503 new units, an increase of 11 per cent quarter on quarter and 79 per cent year on year. The mid-end segment accounted for 71 per cent of total new supply, confirming a trend in the market towards serving end users and laying the foundation for a more balanced residential market when this segment accounted for 65 per cent of condos sold.

Meanwhile, in Hanoi, during the reviewed quarter, there were a total of 8,800 new units launched from 39 projects, a 4 per cent decrease as compared to the first quarter of 2017, according to CBRE. Notably, the mid-range segment continued its expansion, supplying nearly 75 per cent of total new launch. Quarterly sales picked up 5 per cent year on year.

The figures from the two biggest property markets in the country were very positive and sales still focused on mid-range segment, said CBRE. End buyers will be more cautious about safety requirements, resulting in a lower-than-anticipated consumption than earlier forecasts.

A greater challenge to the apartment market is the capital flow shifted to more attractive areas. Money is being channelled into overheating areas where residential land is highly demanded. Weaker fund flow into the flat market will be the biggest pressure for this market until the end of this year. Many investors in Hanoi have withdrawn money from this segment or do not invest any more in it but chosen other segments such as second homes or land plots in many provinces and cities such as Bac Giang, Vinh Phuc and Hung Yen, and particularly in Van Don, Van Phong and Phu Quoc, where prices are highly expected for pickup.
A well-known project investor in Hanoi said, apartment sale has confronted hardships since the beginning of the year because of more attractive land investment, fire safety concerns following serious fires, and unsettled disputes between residents and project owners.

In Hanoi, the apartment segment is experiencing a very difficult period on lack of good supporting information. Mr Tran Nhu Trung, President of Veracty Company, said that many projects and areas in Hanoi tend to lose liquidity and even have no new transactions. The active market in 2017 prompted some investors to price their assets higher than their valuations and buyers’ affordability, he said. Only a handful of Hanoi projects are sell-able, because they have affordable prices.

Distributors are always the quickest in the market. They are now focusing on residential lands in places where there is higher liquidity and brokerage fees are more attractive.

Buyer’s market
Recently, serious fires, especially the Carina Plaza case - a high-grade condominium in Ho Chi Minh City that killed 13 people and injured many others, have negatively impacted the whole market, making consumers more cautious with this option. They are more cautious about buying an apartment. This may be a drag on the apartment market.

This is also time for investors to have a stronger commitment to product safety in addition to quality requirements. Fire safety warnings urge customers to spend more time on researching and investigating projects, while addressing security issues that they previously neglected.

Previously, location was the mantra of apartment sellers as this was a primary interest of buyers. The next is indoor amenities. Meanwhile, very few cared about constructional quality and safety factors. Recent deadly fires have dramatically changed behaviours and approaches, with more priority placed on construction quality and safety factors, particularly fire protection systems.

Bao Chau

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