Is there a high-end apartment oversupply in HCM City?
The reports about the real estate market in the first quarter of the year released by consultancy firms all show a sharp increase in the supply of high-end apartments in HCMC. This has raised concerns about oversupply in the near future.
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According to CBRE, high-end apartments accounted for 41% of the total apartments sold in the last three months in HCMC, while mid-end apartments were 39 %. It is estimated that 18,200 high-end and mid-end apartments would be put on sale this year, while 41,000 products of this kind would be on offer the next year.
Meanwhile, apartments with more reasonable prices, between VND600 million and VND1.2 billion, are now in short supply.
According to Cushman & Wakefield, A-class apartments account for 33 percent of total apartments ready for sale, while B-class 40 percent.
And according to Savills, A-class apartments have the highest absorption rate, about 23%.
Nguyen Tri Hieu, a renowned banking expert, believes that the HCMC real estate market is now full of high-end apartment projects because investors put high hopes on Vietnam’s TPP (Trans Pacific Partnership) membership and other free trade agreements (FTAs).
He noted the high expectation has made the real estate market heat up.
Most people are buying apartments at this moment just for investments, while very few people buy for accommodations. In other words, real demand is not so high.
“Investors have the right to keep a high hope that the high-end market segment would bring high profit, but it is necessary to reconsider liquidity,” Hieu said.
He has warned that if fiscal tightening policy is not applied, redundancy would be seen later this year, which would be followed by a real estate bubble by 2017.
Dang Hung Vo, former Deputy Minister of Natural Resources and the Environment, also thinks the supply has increased sharply because investors have placed high expectation on the policy on allowing foreigners to buy houses in Vietnam.
Though the new policy can help stimulate l demand, the number of foreigners buying houses remains modest because not many people have the financial capability to buy houses, especially high-end apartments.
However, Vo does not think ‘indigestion’ would occur in the real estate market Besides, the current policies on tightening lending to fund real estate purchases and controlling supply would also help.
