High-End Housing Segment Has No Attraction

10:41:24 AM | 29/8/2019

Unlike 2018, prospects of the high-end housing segment in the real estate market in 2019 are not positive as the liquidity of this segment fails to meet the expectations of most investors. The saturation of the market has affected the psychology of investors in this segment.

2016 was the "booming" year of the real estate market, especially the strong rise of the high-end housing segment recorded by the explosion of high-end projects, especially houses, apartments, projects launched by the real estate giants. This caused an imbalance between supply and demand in Vietnam's housing segment, leading to a decline in demand and a slowdown in the market. In the first 9 months of 2016 alone, the sales of luxury housing decreased by 10% compared to the same period last year, according to data from Dragon Capital's survey.

One reason why the high-end housing market has been stalled is that at the beginning of 2018, the State Bank of Vietnam requested credit institutions and foreign bank branches to shift credit structure to production and business and limit credit for real estate and construction. This is considered an unfavorable factor for real estate enterprises, because banks would carefully survey the land price before lending to businesses, especially in areas that were abnormally pushed up in the periphery, so the suburbs had to reduce the lending rate to the lowest level fluctuating around 50%, even 30% of the market price. Commercial banks often have two main objects: real estate businesses and home buyers. In particular, the most disadvantaged in increasing interest rates and tightening credit are those who have demand to buy real houses.

Along with the general situation of the real estate market, high-end and luxury housing projects are forecast to continue to be scarce in 2019. In two big cities, Hanoi and Ho Chi Minh City, the segment of mid-end and affordable apartments is taking a leading role with about 80% of the market demand. Buyers are very interested in mid-end and affordable projects because their products are suitable for their financial capacity, the project location is able to connect well to the city center as well as adjacent areas of development. The high-end segment only attracts those with economic potential in society.

According to statistics of transactions through CBRE in the high-end and luxury segments, the market attracted great interest of buyers from abroad. The proportion of foreign apartment buyers accounted for 76%, of which 31% came from China. This is one positive signal for the high-end residential real estate market when this segment is attracting the attention of the domestic and regional super-rich.

With a clear shortage in high-end projects in big cities, buyers can see the potential for capital increase as well as long-term investment opportunities in this segment. Along with that, the launch of new projects with better quality besides higher average income and good financial packages will facilitate the positive changes of the high-end housing market in the new stage.

Luong Tuan