If more social and affordable commercial housing is built, the frozen real estate market could thaw, according to experts.
There is very high demand for social housing and in the low-end and lower-middle segments where prices are VND1 billion (US$42,370), VND2 billion and VND3 billion per unit and steady regardless of the state of the market.
Tran Xuan Ngoc, CEO of property developer Nam Long Investment Corporation, said 2023 is expected to be an extremely difficult year for the market with challenges greater than during the real estate crisis of 2013, and one of the solutions is to build more housing for occupation rather than investment.
Social housing, and affordable and mid-priced houses used to account for some 80% of his company’s product basket, and high-end housing for the remaining 20%, he said.
It had maintained this formula for decades, but this year the ratio of high-end housing dropped to just 8%, he said.
According to a report by real estate consultancy DKRA Vietnam, in Ho Chi Minh City and its vicinity, transactions in the first four months of this year were concentrated in the low-priced segment.
In April, when the real estate demand fell by over 80% year-on-year, there were still transactions in this segment.
In the past year liquidity has completely gone out of the other segments, with few high-end properties priced at VND10 billion or more and mid-priced ones at VND5-9 billion finding buyers.
Most of the modest number of transactions was in the social and affordable housing segments priced at VND1-2.5 billion, but supply was limited.
According to experts, increasing the proportion of low-cost housing and making payment policies more favorable for buyers can increase the market’s liquidity.
Nguyen Mac Hoai Nam, CEO of Nam Phat Consulting Service Company, said affordable housing plays a key role because demand for it always exists whether the market is booming or frozen.
If prices are reasonable and not inflated, it attracts a steady stream of buyers who want houses to live in and not resell for a profit, he pointed out.
Increasing the development of low-end houses is the ideal solution to revive the property market from its slump, but it needs to be accompanied by financial solutions, he said.
For instance, bank loan interest rates should be reasonable and the tenors of loans should be longer, he said.
But not all businesses have sufficient resources to do so now, he admitted.
Besides, it is difficult for developers to restructure their basket of goods, which is focused on the high-priced segments since low-priced ones have lower profit margins, he said.
“The positive aspect is that the current difficult situation has forced businesses to add housing products that meet real demand (for accommodation and not investment), and so there is less risk.”
Many housing developers are restructuring by shifting to the affordable segment to improve liquidity.
Le Hoang Chau, president of the Ho Chi Minh City Real Estate Association, said social housing and low-end commercial housing play a key role in solutions to the market recovery.
“Although the supply-demand gap is large, it is not too late to rebalance with affordable and social housing, which are in short supply.”
If investment licensing and related legal procedures are accelerated, there would be more social and low-end housing projects in late 2023 and 2024, he said.
If bank loan interest rates drop further, affordable housing could revive the dormant property market, he added.