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Developers eschew luxury to meet ‘real’ needs
A real estate market that has lost steam since the beginning of this year has many developers turning to mid-level segments to meet “real” needs.
The absence of speculators in the market has allowed mid-level apartments, a relatively untapped segment, to surface, leading developers say.
Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association, says most of the successful transactions in recent weeks involved apartments costing less than VND1.5 billion (US$90,717) and customers were home buyers who have real needs, as opposed to speculators.
According to property company CB Richard Ellis (CBRE), of about 8,000 apartments it has put out for sale this year, those that could be sold were often of small size and had reasonable prices.
CBRE Managing Director Marc Townsend says genuine home buyers do not have many choices as there are few products suitable for them.
The mid-level price segment has great potential but it was left untapped because most companies just focused on competing in the luxury segment, says Nguyen Nguyen Thai, deputy director of CBRE.
Although medium-priced houses fetch smaller profits, they are easier to sell, he says, noting that such houses are suitable for newly-weds, retirees and young people.
Customers no longer insist on accommodation at the city center, and thus investors can choose to build their projects away from it to keep the prices reasonable, he says.
In a recent visit to Vietnam, some members of the Malaysian Chapter of the International Real Estate Federation observed that many Vietnamese customers are young and want to own a house when still single. Therefore, small apartments can meet their demand.
Thai also said the demand among overseas Vietnamese and foreigners for luxury houses is not high. For example, last year only 130 Vietnamese expatriates had reportedly bought houses in Vietnam, mostly in HCMC.
Many locals used to buy upscale houses for foreigners to rent, but with housing prices increasing, the income from house rents was no longer attractive enough, he said.
Experts say real estate developers should conduct market surveys before starting their projects so that their products can meet the real demand of end users.
Closing ranks
Meanwhile, many developers struggling with the downturn in the market are working together with local and foreign peers to deal with funding shortages and other problems.
Since the beginning of this year, many developers have found themselves facing a dilemma about ongoing projects. If they decide to halt construction, they will have to wait for a long time to collect the money they have invested. But if they want to continue with their projects, they cannot find enough funds as banks have tightened lending.
Chau says each developer has difficulties and strategies of their own, but the general trend is to unite to overcome difficulties.
Investors in the Sunrise City residential project in District 7, for instance, have asked foreign construction companies to make financial contributions to the $400 million project in an arrangement where they would divide among themselves the apartment blocks built.
Nguyen Xuan Chau, General Director of Nova Homes, one of the investors, said this strategy would make it easier for the developers to generate funds and prevent delays.
While some developers have been seeking the cooperation of foreign companies, others have transferred their projects to other investors after completing certain stages.
According to International Investment Connection and Enterprises Trading (ICE), a merger and acquisition company, it has been assigned to find new developers for more than 50 residential projects, some of which are under construction.
Successful transfers, though few, prove that there is a new trend in the development of projects, with each developer specializing in each stage such as designing, site clearing, building and transferring, says Vu Thanh Phuc, project manager of ICE.
Recently many real estate companies have also joined hands to distribute the final products. With a view to expanding the market for apartment projects, local big names like ACB Real Estate, House Vietnam and Green Land have cooperated with a newly established company to find more customers.
Thanhnien
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