Ho Chi Minh City's Next trend: Flats and High Buildings to Increase

Ho Chi Minh City’s real estate market has been in deep freeze for an extended period of time. Investors have blamed the standstill on regulations they deem irrelevant, especially the ban on project transfers and land lot sales. However, at the beginning of 2006 they are eyeing a brighter year ahead.

 

Main reasons: the authority’s inadequate management
According to Dr. Tran Du Lich, Head of Ho Chi Minh City Institute of Economics, the so called real estate market freeze is not only the status of less transactions, less bidders. For him, the authority’s inadequate management has also had a bad impact on the market. For example, many projects that were not punctually handled have irritated investors and as a result, the market was more frozen due to less new investments.

 

While real estate companies are accused of selling property at exorbitant prices, resulting in the country’s property market freeze, the companies have pointed to the current compensation policy on site clearance and complicated administrative procedures as major problems affecting the sector.

 

There are several reasons for this. Firstly, the land-using price is far higher than its real price. Therefore, the rule of demand and supply has not been applied exactly as it is. Secondly, many people invest in real estate for short-term interest instead of real demands. Exorbitant real estate prices, which put these housing projects out of the reach of needy individuals and companies, have been cited as the main cause for stagnation, with real estate businesses accused of artificially hiking rates for higher profits.

 

Thirdly, those who need real estate most lack it, and those who hold it lose their chance of gaining profit through other business activities. Fourth, the authority’s inadequate management has had a negative impact on the market and let the market freeze further.

 

Land prices for housing projects have sky rocketed, according to businesses, following a recent decision to increase compensation for site clearance, which is 10 times the previous amount. In addition, complicated administrative procedures, that take almost a year to get a project started, up the interest rates significantly on loans taken by developers, they said.

 

Moreover, different regulations for housing projects in cities and provinces have led to rising real estate prices. For example, Hanoi’s regulations call for the settings aside of 50 per cent of a housing projects at basic prices for buyers chosen by the city.

 

Solutions
The needs of property for enterprises to do their business are still very large. But they cannot reach the property they need because of the reasons mentioned above. So, the State now has the biggest role in providing a breakthrough in the freeze.

 

Through its tools, the state has to drive the real estate market in the right direction. In other words, the market now needs a united and complete package of solutions from the State.

 

The Property Law was passed by the National Assembly at the beginning of December 2005. The law will come into effect from July 1^st 2006 and this is a very good legal framework for the transaction of property between each sides. In this law, the right of processing property is clearly indicated and safeguarded. It opens the range of people, including Vietnamese people from overseas. They will not need inhabitant certificates to participate in property transactions. Moreover, the social housing budget will be tax free for many circumstances.

 

Based on those facts, Dr Tran Du Lich forecast that the property will be lower in 2006 and many people can satisfy their true needs of housing and land use.

The next trend of using land and housing is flats. Many people are now choosing to live in comfortable flats instead of finding their own land area to build and live separately. This is also the direction the Ho Chi Minh City authority will take in the hot field of property.

 

In the last months of 2005, many new high-rise building and living quarters were built and got high interest from a wide range of people. And with flexible trading methods, in which people can get some loans from related banks to spend on their dream apartment, now many people can have their own place to live.

 

Van Phuc Hung Joint Stocks Company is one typical example of a new method of operating and trading. It has focused on building high class living quarters such as Phu My, with total invested capital of US$25.7 million. The company is also building a bridge to connect high-class living quarters Phu My with Phu My Hung urban zone. In order to contribute to the charm shape of the whole Southern Saigon urban area, Van Phuc Hung’s Phu My high class living quarters were built in accordance with the standard and shape of typical buildings of Singapore, with the building intensity of 25 per cent.

 

Van Phuc Hung Joint Stocks Company is to implement two more projects in Thu Duc District. They are Linh Dong settlement area with 1,116 flats, with the invested sum of US$25.1 million; Tan Son Nhat – Binh Loi settlement area; and Tam Phu living quarters with the invested sum of US$15.7 million, in which there are 3 living blocks with 500 flats.

 

At the same time, Van Phuc Hung Joint Stocks Company is also implementing and completing several buildings to hand over on time in 2006 – 2007, they include Southern Land high-rise building, Khang Phu high-rise building, Gia Phu living quarter; The Manor high class flats, Cantavil high class flats, and Van Doand living quarter.
Hai Nguyen