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Villa demolition ban shocks developers
A decision to stop the demolition of old villas to make way for high-rise buildings in downtown Ha Noi has shocked speculators and owners alike and sent prices tumbling by up to 30 percent.
The Ha Noi People's Committee has issued a regulation requiring construction departments and people's committees to stop the destruction of the old villas and refused to grant construction licences on the land they occupy.
Local authorities were required in the regulation to tighten their construction management processes to ensure standards and rules were applied.
Investors intending to upgrade old apartments by adding another storey were now limited to nine storeys.
Immediately, sales of old apartments came to a standstill and prices declined by 20-30 per cent.
People with VND1.5-2.5 billion ($US78,947-131,578) to invest instead turned to buying 80-100sq.m apartments in new urban areas with modern infrastructure, such as My Dinh, Cau Dien, Van Quan and Van Phu or Xa La.
Those who had already bought old apartments with a view to reselling or adding value and profiting had instead lost equity, placing loans at risk.
This was in stark contrast to the apartment boom.
For example, property speculator Nguyen Van Bach bought two old flats in Ba Dinh and Dong Da districts with a view to replacing them with new buildings, estimated to double his money.
He said owners of old apartments in Thanh Cong were given new flats 1.8-2.1 times larger than their old ones. Prices of the new apartments were US$1,900 a square metre, producing a large profit, taking into account the cost of providing a resident with a new apartment and renting temporary accommodation for them during the construction phase.
The boom in old apartments peaked mid last year after city authorities approved a plan to provide 23 new apartment blocks in the city.
Because these projects were centrally located, landlords were able to sell them off the plan and at high prices.
Consequently, prices of old apartments in Kim Lien, Nguyen Cong Tru, Vinh Ho, Giang Vo, Nghia Tan and Nghia Do were pushed up by speculators.
For example, old apartments in Vinh Ho measuring 35-40sq.m which once cost VND300-350 million($15,790-18,421) climbed to VND800 to VND900 million ($47,368) by mid last year.
There were some priced at VND1.6 billion ($84,211) and one, a 42- sq.m flat at the Giang Vo fetched VND2 billion ($105,263).
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