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City's real estate boom needs good planning

Update: August, 01/2015 - 08:55

While residential developments in the west and north of HCM City have few customers, the property spotlight is falling on the east and south of HCM City where Districts 2, 9, and Binh Thanh are seeing plenty of transactions.

It is sure to put pressure on infrastructure to keep pace with the rapid growth in the real estate market.

Jonathan Tizzard, Cushman & Wakefield Viet Nam's director of valuation and research, speaks with Viet Nam News about this.

 Why do you think the real estate market is performing better in the east and south than in the west and north of HCM City?

Jonathan Tizzard

Given the lack of availability of land for residential development, new supply in Districts 1 and 3 has been limited. New development has tend to spread to neighboring districts such as Binh Thanh District and Districts 2, 4 and 7.

However, the eastern region, especially Binh Thanh District and Districts 2 and 9 are deemed to be more attractive to investors due to its close proximity to the CBD as well as the presence of modern facilities such as an international school, university, shopping centres including the soon-to-be biggest retail centre in town (Vincom Mega Mall).

It will also be the first to have an operating metro route. Speculative purchases and buy-to-let investment will likely increase in the area, as the liberalisation of foreign ownership laws has led to bullish sentiment in the residential market. Binh Thanh District and District 2 are desired for future mid- to high-end projects while Districts 9 and Thu Duc will be targeted for more affordable residential projects.

How does this discrepancy in development create pressure on infrastructure, traffic/transportation and population?

The infrastructure development in the eastern and southern areas is currently much better than those in other areas and access to the Saigon River is also found in these areas. This has meant that development recently has been focused in these areas.

There is a direct relationship between access to infrastructure and development, and this can be seen in the rise in the value of land that surrounds new infrastructure development.

However, careful attention needs to be paid by city authorities to the density of new development and the resulting effect on traffic. As an example, there are many new developments situated along Nguyen Huu Canh and on the other side of the Sai Gon Bridge on the Ha Noi Highway. These roads are currently fairly quiet especially outside of rush hour and provide speedy access to the CBD from the eastern side of the city. However, there are over 10,000 new apartments scheduled to be completed along this route over the next two years from mid- to high-end schemes.

These schemes normally have households that use cars. This could mean that 10,000 more cars could regularly use this route over the next few years. Obviously it is debatable whether this many new cars will suddenly appear, but the situation has the potential to cause gridlock in the city in the very near future and comes at a time when car sales in the country are rocketing and, although road building is increasing, it is not keeping up with new car sales.

The importance of public transport in a growing city cannot be underestimated. HCM City has started to grow its network of public transport and this will be key in the future to keep the city moving. Motorbikes are currently the most popular form of transport and this will not change in the short term, but at some point public transport needs to become the main form of transport.

There is no doubt that traffic and transportation will shape the city over the next few decades. If the traffic gets worse and gridlock is common, you will find that the commercial core of the city will fragment and new areas in suburban fringe locations will form.

Traffic problems could also be the catalyst that Thu Thiem New Urban Area needs to spark in to life. As companies and workers find it increasingly difficult and unpleasant to travel to the existing CBD, they will look at other areas such as Thu Thiem that have good infrastructure and quieter roads.

n How do you think we can balance the development of various parts of the city?

Good town planning is the key to creating a balance between the different areas of the city. The Government will have anticipated traffic problems and, in its plan for the city to 2030 and beyond, will look to grow the city in new areas and counter the problems that become apparent. The free market will also help to keep a balance between different areas of the city: as one area becomes polluted and full of traffic, businesses and residents will look to move to other areas. — VNS

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