HCM City apartment market lacks new supply of affordable units

April, 25/2021 - 17:11

High- and mid-priced apartment projects continued to lead the HCM City market in terms of new supply in the first quarter, with affordable units remaining scarce, according to real estate consulting firms.

 

Apartment buildings in HCM City. VNA/VNS Photo Trần Xuân Tình

HCM CITY — High- and mid-priced apartment projects continued to lead the HCM City market in terms of new supply in the first quarter, with affordable units remaining scarce, according to real estate consulting firms.

With 4,900 units, primary stock was down 56 per cent quarter-on-quarter and 31 per cent year-on-year, according to Savills Vietnam’s quarterly report on the city property market.

Grade B led primary supply with a 57 per cent share. New urban areas in districts 2, 7 and 9 had a 78 per cent share of grade B primary supply.

Quarterly sales of less than 2,100 were the lowest in five years and represented a quarter-on-quarter decrease of 76 per cent and year-on-year decrease of 56 per cent, mostly due to lower primary supply.

A higher rate of large-sized units with higher unit prices has slowed performance at existing developments, Võ Thị Khánh Trang, associate director of research at Savills, said.

Prices moved up across all grades, especially in new phases of existing developments, where unit prices increased by 6 per cent over their previous launch, she said.

There is very limited supply of affordable units with primary prices of under US$1,000 per square metre and new supply would steadily fall in the coming years, she said.

Limited land availability in central areas are pushing up prices of apartments, she added.

According to DKRA Vietnam, the prices of affordable apartments doubled between 2013 and 2020 to VNĐ30-32 million ($1,300-1,380) per square metre.

In the first quarter of this year, they went up by another 5-10 per cent.

Even in neighbouring provinces such as Bình Dương and Đồng Nai, apartment prices have jumped to VNĐ33-45 million ($1,430-1,950) per square metre.

Grade A led primary supply last year with a 69 per cent share while supply of grade C were almost zero, according to a report by DKRA.

In the first quarter of this year grade A continued to lead the HCM City apartment market in terms of new supply and there was very limited supply of affordable units, it said.

A study by the HCM City Real Estate Association showed that high- and mid-priced units accounted for 70 per cent and 25 per cent of apartment supply last year.

The affordable segment accounted for only 1 per cent of the primary market at a mere 163 units.

Lê Hoàng Châu, chairman of the association, said an apartment project with initial listing of VNĐ30-33 million ($1,300-1,430) per square metre is now sold at VNĐ50-55 million ($2,160-2,380).

It is simply raised to a higher grade and sold at higher prices, making it impossible for end users to afford it, he said.

A survey by the HCM City Institute for Development Studies estimated the housing demand in the city in 2021-25 at 45 million square metres.

The limited supply of affordable apartments and rapid increase in prices mean apartments are bought for speculative purposes.

Around 70 per cent of high- and mid-priced apartments are left unoccupied as a result, the survey found. —VNS

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