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ECONOMYREAL ESTATE

Market in short of affordable housing supply

Updated at Sunday, 29 Oct 2017, 09:49
The Hanoitimes - The supply of affordable apartments under VND1 billion (US$44,000) in big cities has become increasingly scarce due to rising construction costs, industry insiders said.
According to market survey, in the past two months, the housing market in Ho Chi Minh City welcomed supply from some affordable apartment zones, such as EHomeS (Nam Long company), CitiEsto (Kien A Group), Avila 2 (Thai Bao company), but that was fairly modest compared to the demand for affordable housing of the people.
Nguyen Thu Hang, a longtime investor on the apartment market, said that apartments priced at around VND1 billion were the main supply on the Ho Chi Minh City market. However, in more than a year, finding apartments at this price has become increasingly difficult for those with housing needs.
 Caption: The segment of affordable and mid-end apartment segments will continue to lead the market.  Caption: The segment of affordable and mid-end apartment segments will continue to lead the market.
 The segment of affordable and mid-end apartment segments will continue to lead the market.
Industry insiders said that the limited land fund for developing apartment buildings; the increase of land price and land use fees and spending on lending interest rates; and the time consuming construction procedures have caused the affordable apartment segment, which is already in short, to become increasingly scarce.
Regulations on the limit area of commercial apartments, the population density and sand price hike have also pushed up the construction costs significantly, they said.
As shared by a common apartment developer, the profit margin of this segment is currently very low, ranging from 8-12 percent, while that of the high-end segment may range from 30-40 percent. In the current competitive situation, the problem of investors is to ensure that the apartment buildings are optimally designed and there are good contractors to save construction costs.
The real estate developer also added that for the development of land fund for affordable apartment segment, the spending on land is currently accounting for fairly large proportion. If it exceeds 20 percent, it is difficult to make profit. In addition, the average height of an apartment building must be from 24-28 floors and investment efficiency cannot be ensured if the average height of the building is less than that.
Statistics of DKRA Vietnam showed that in the first quarter of 2017, of the 7,130 apartments launched into the market, the affordable housing accounted for 45 percent. This situation continued to be maintained in the second quarter, but the proportion fell to 41 percent.
In the third quarter, mid-end apartments were the leading segment on the market in terms of supply source (3,898 apartments of 7,738 apartments, accounting for just 28 percent with consumption of 2,138 units.
The limited supply is the reason leading to the rise of affordable housing prices. Currently, the price of this segment is ranging around VND19-20 million per square meter. It is forecasted that the lowest price will be from VND20-22 million per square meter. According to sharing of Nguyen Duy Minh, an apartment may encounter price increase of 10-15 percent, but it may be 20 percent from 2018.
From the actual situation of Him Lam Phu Dong apartment zone, Ngo Quang Luc, vice general director of Him Lam Land said that the current apartment prices have increased by 30-40 percent compared to the launch for sale in mid-2016.
According to DKRA Vietnam, in the short term, the segment of affordable and mid-end apartment segments will continue to lead the market.
In the third quarter, the consumption of affordable apartments reached 92 percent of the 2,138 apartments supplied to the market. According to market research companies, since the current demand for affordable housing is very huge and will maintain in the next 5-7 years, having five or 10 additional developers joining this segment is not an issue.
 
​Phuong Thao
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