Positive Signs from Real Estate

As predicted by experts, with the current recovery rate, the real estate market in 2015 would enter a new more aggressive and also more risky competition.

 

A bright spot in the real estate picture is the segment of affordable apartments, priced below VND1 billion. This segment is attracting huge interest because it fits the financial ability of the majority of people. In the Hanoi real estate market, affordable condominium projects such as Muong Thanh in Linh Dam urban area, Thang Long Victoria in Hoai Duc district, or the condominiums in of Dang Xa are “hotter” than ever.

 

In the Ho Chi Minh City market, there are also real estate businesses enjoying success in this segment. One example is Nam Long Company with the Ehome apartment chain. Over one year ago, Nam Long unexpectedly launched the line of Ehome 3 apartment with an average price around VND800 million/unit, immediately attracting young customers. Recognizing this as an opportunity not to be missed, Dat Xanh corporation, one whose strength lies in the ground field also has jumped to invest in this segment marked by the launch of the Sunview Town project with price about VND700 million/unit.

 

Positive signs of the real estate market are not only reflected in affordable condominium projects, but also can be seen through the fact that a series of projects “hibernating” for a long time now have been “resurrected” and are running strongly, creating a new vitality for the comeback of the apartment segment. The decision to revive these project is a wise strategy of real estate businesses who have strong financial capability, because it takes a lot of time to get a new project authorized, while the real estate market in Vietnam is a risky one. The acquisition of unfinished projects has helped businesses save time as well as input cost which in turn made a positive impact on housing prices.

 

The revival of the affordable apartment segment at the second half of 2014 has lit up investors’ confidence right when it was at its lowest level in years, it also made investors have another look at a segment they had been mistakenly ignoring for a long time. In fact, this segment has been leading in sales last year. Statistics showed that 70 percent of new supply coming from intermediate and low budget projects. In the third quarter alone, up to 63 percent of successful transactions came from this segment. This proves that the demand of the market is leaning toward low-cost apartments with reasonable area meeting real living needs.

 

According to experts, based on current movements of the market, in the near future, the affordable apartment segment would get even “hotter” as demand continues to increase. This would be the basis for enterprises to switch investment purposes in order to unfreeze capital flows, so far, many firms who previously had invested only in high-end apartment segment and special ground have actually turned to the affordable segment.

 

In the near future, this will continue to be the key factor leading the real estate market. Although labelled as low-cost housing, there are few projects that meet the requirements of the VND30 trillion support credit package. This presents a problem for people in accessing funds for house buying. While the market is lacking reasonably priced small apartments, there is still a large inventory of expensive luxurious apartments. To solve this problem, many companies have decided to adjust the area by dividing large apartments into smaller ones in an attempt to reach consumers, but this move itself also faces many procedural barriers.

 

According to representatives of real estate businesses, it would be best if the government and the Ministry of Construction issue business support policies, especially in terms of procedures, so businesses could be more proactive in adjusting housing area for sale.

 

As for enterprises, in order to unfreeze the credit flow, obviously it is necessary to have a long-term vision of the market and accurate assessment of market demand to take appropriate steps. When the market recovers, the level of competition will be also getting fiercer, especially among companies with foreign capital. Therefore, long-term vision will be an important factor to help enterprises overcome difficulties.

 

For policies, it’s necessary to simplify procedures to convert projects, mechanisms to issue secondary mortgages, and allow late payments of land fees. It’s also important to improve market transparency through disclosure figures, purchasing process and partnership among businesses to strengthen people's confidence.