A severe land shortage and lengthy legal procedures have prevented construction of affordable apartments, a new report says.
The report, prepared by property consultancy firm DKRA Vietnam, said that from mid-2017 onwards, the Grade C apartment segment, comprising low-cost commercial housing priced at $1,000 per square meter or less, has seen significant decline.
There have been months when the market has not seen a single Grade C apartment on sale, according to the report.
Grade C flats accounted for 41 percent of new housing supply in the first quarter of 2017, 32 percent in the first quarter of 2018, 29 percent in the second quarter and a shocking zero percent in the third.
The report said scarcity in the Grade C segment is set to be prolonged one.
With the decline in supply, new Grade C apartments are also being positioned further away from the city centre. Between 2016 and 2017, Grade C apartments could be purchased in districts 8, 9, and Thu Duc. Now, they are concentrated on the city’s outskirts districts like 12, Binh Tan, Binh Chanh and Nha Be.
Ngo Quang Phuc, general director of property firm Phu Dong, said it was very difficult to implement new low-cost apartment projects because there was not much free land available for them.
The current situation does not make it easy for investors to free up land at prices suitable for cheap apartment projects. Even if suitable land is acquired, it takes up to several years for builders to complete all legal required formalities required, he said.
“Given the current situation, I expect it will take another 5 to 10 years for the government to roll out favourable financial and land policies that will allow the revival of affordable apartment projects,” Phuc said.
Hoang Dinh Trung, project manager of e-commerce portal FSell, said that more than 50 percent of buyers on property website nhadat.vnexpress.net were demanding apartments priced at under VND1 billion ($42,752).
The DKRA report said that the situation calls for long-term national housing programs alongside infrastructure development to connect these areas with the city, including improving the public transport system to shorten travel time between the locations.