VNRE - Housing supply, especially the mid-end segment, has increased significantly, forcing many project developers to fight for customers and to offer different incentives to woo homebuyers. Although there is a huge housing demand out there in the society, many people are unable to afford houses for different reasons.
The Saigon Times Daily talked to Le Chi Hieu, board chairman and chief executive officer of Thuduc Housing Development Corporation, over the current situation and market trend. Excerpts:
The Saigon Times Daily: It is reported that the market last year focused more on the mid-end apartment segment, and the tendency is expected to continue this year. What do you comment on this trend?
- Le Chi Hieu: The demand for the mid-end apartment segment accounts for over 40%; the luxury segment some 20% and the rest is for low-cost condo segment. Therefore, the two segments of mid- and high-end apartments are leading the market, thus it is understandably seen why many project developers target middle-income earners.
However, the mid-end apartment segment can include different sub-categories. A project can be designed with high-quality building materials and offer different serviced facilities, and thus its selling price is higher. Meanwhile others come with cheaper building materials and offer poor living spaces. The utmost purpose is to reduce the apartment cost price, and as a result those condo projects are of lower quality. In general, the cheapest thing is the dearest.
Given the current market trend, it seems that the luxury segment will continue to face challenges this year?
- This segment will continue to face tough challenges ahead. It, however, depends on the location and the developer’s brands. For example, a luxury condo project that we have joined hands with Korean developer Cantavil to develop has seen a positive feedback in the market. The project is on its second phase development with two 36-storey buildings and sections for commercial services and other serviced facilities, and apartments are offered from US$1,650 per square meter (over VND32 million). Although the project has not yet finished its foundation, homebuyers have deposited for some 40% of the total number of the project’s apartments. This is somehow proved that there still has demand in the luxury segment, provided that developers offer a reasonable price.
At present, many developers in this segment have to cut apartment prices or to use tactics of sales programs including supporting loan interest to woo buyers if they do not want to see their capital investment sink into their condo projects in the wake of the current high borrowing rate. That is the big challenge for developers.
The so-called affordable apartment is priced between VND15 million and VND18 million per square meter. However, as compared with the current common income, the housing price is beyond homebuyers’ financial capacity. What do you think about that?
- In fact, potential homebuyers must be middle income earners if they are to afford a mid-end apartment, and reality shows that many such people still cannot buy low-cost apartments for their own. However, we still see demand in the middle segment as the number of buyers with better income is increasing.
The current problem is how to match the housing price with the buyers’ pockets in the wake of inflation that has triggered prices of building materials and labor cost to soar, pushing up the apartment price.
Another factor causing the housing price to soar is the credit tightening policy and the high lending interest rate besides the impact of Decree 69 that requires developers to pay land use fee matching market prices. To wake up the market, the Government should issue a different policy in land use fee, or else the housing price will continue to go sky-high.
The housing market is witnessing abundant supply, and of course a strong competition is unavoidable. How do you comment on the market movement?
- The apartment supply in the mid-end segment has increased for two straight years since 2009 as many developers have been joining this segment. It is sure that the competition has intensified day by day. However, the competition is not a direct fight among developers because property is unlike other products which can be launched for sales en masse, but it depends much on geographical locations.
The current problem is the purchasing power which despite a steady increase is still lagging behind housing prices. The local property market used to see many developers enjoy a big profit margin thanks to housing price rising sky high in the past. However, the golden days are gone. Many developers are fighting for buyers by offering good prices and incentives including supporting buyers with interest sums when taking out bank loans in a move to quickly clear their stock.
How do you foresee the property market in the coming time?
- Any developer will expect a growing market and a higher purchasing power in the coming time. Foreign capital investment is flowing into the country. It is expected that the local stock market will turn rosy in the first half of this year. Then many investors will realize their profits by shifting to property investment, thus I project the property market will look brighter from the second half of this year.
Source: Saigon Times