Low-priced Housing: Appealing to Investors

Both investors and citizens are now cautious with real estate laws issued in late 2010. Many real estate experts predict that 2011 will witness some segments heating up, others slowing down. However, the low-priced housing segment is likely to be vibrant thanks to current high demand. 

2010 saw an unhappy luxury housing market, with no offer in first eight months. Meanwhile, housing projects priced around VND17 million per square metre strongly burst out. According to experts, many enterprises will focus their investment into low-priced housing in 2011. Housing projects offered at price of lower than VND20 million per square metre will be attractive. Especially, apartments from 60 to 90 square metres priced from VND 800 million to VND 1.4 billion will be paid much attention.

 

Heads of Indochina Land, real estate developers with a variety of luxury real estate products such as Indochina Plaza Hanoi, Hyatt Regency Da Nang and River Garden, said Indochina Land’s biggest project in 2011 is Complex Saigon South Residences, with about 1,000 – 1,200 apartments, in which the majority are low-cost. Moreover, said Mr Peter Ryder, CEO of Indochina Capital Cor. in 2011, Indochina Land will shift investment into the low-cost housing market since this market in Vietnam has high potential and meets the demand of many Vietnamese.

 

Like Indochina Land, Minh Viet Investment Joint Stock Company, an investor in luxury housing in Vietnam, announced a low-priced apartment project in Song Ngoc building block in Ho Chi Minh City. Besides, there are more and more enterprises eyeing projects of low-cost housing, which target customers with medium income. Some famous enterprises such as Nam Cuong, Dai Phat and Xuan Thanh also announced their entry into the low-cost apartment market. In Ho Chi Minh City, the situation is similar.

In recent years, the luxury real estate market in Hanoi has seen many projects. At the end of 2010, investors continuously offered projects of high-cost in Hanoi and Ho Chi Minh city such as: luxury apartment project Viglacera Complex in Tu Liem District, followed by Dolphin Plaza project in Cau Giay which was offered at average price of VND 37 million per meter square, luxury apartment project in Mo Lao apartment blocks – Ha Dong, and two projects of luxury apartments in Binh Duong. However, the enthusiasm from investors and enterprises is only matched by customers’ indifference.

 

The luxurious Indochina Plaza Hanoi project in Cau Giay District made many offers in the market. Initially, the project was advertised by Savills but some other enterprises joined the distribution such as Knight Frank Vietnam, CBRE and then DTJ real estate stock took over the last offer. So far, the project’s investor said that there have been only 60 % of apartments sold. According to Mr Nguyen Tran Nam, Deputy Minister of Construction, Vietnamese demand for housing is still large whereas payment capacity is still low. Recently, the many luxury projects implemented have far exceeded demand. It forces real estate enterprises, especially investors in luxury housing, to completely restructure.

 

Mr Nguyen Dung Minh, Sales Manager of Savills Vietnam, said that if the luxury apartment market does not bring much profit, investment into other markets is natural. According to General Director of Minh Viet Investment Joint Stock Company, Edward Chi, enterprises shifting their investment into low-cost housing is an inevitable trend of the new market when urbanization rates are high while resident’s potential earnings are not great.

 

Customers of high, medium and low-cost markets are different. Therefore, all segments see development but the core is when, how and how much development is enough, commented Mr Edward Chi. However, according to Mr Dang Van Quang, Director of Navigat Consulting Company, it can be said that project investors had to shift their investment due to difficulty in the luxury market, since luxury housing just meets the demand of certain number of high income people whereas the majority of labourers now have medium income. Therefore, the demand in this market cannot be as large as in medium or low-cost market. This is what makes investors seek lower-cost markets.