Sub-$120,000 apartments disappearing from HCMC market

A few years ago Binh and his family rented an apartment on Vo Van Kiet Street in Binh Tan District.

They had initially planned to buy it at just less than VND3 billion, but after a year they discovered it had some inconveniences such as the lack of a balcony that made it hot in summer.

Newer buildings in its vicinity did not have those issues, but were too expensive, and so they bought an apartment in District 8 for VND2 billion.

The tradeoffs for the affordable price include lack of title deeds yet and a location 12 kilometers from downtown.

“Buying an apartment for less than VND2 billion is nearly impossible without compromising on many factors, especially location,” Binh says.

Hoang Dung similarly gave up plans to find a cheap apartment and decided to take a VND2 billion loan to buy an apartment costing VND3.6 billion in District 7.

He says while there are some old apartments that cost less, they come with many disadvantages such as low ceilings and slow elevators.

Property consultancy Savills classifies apartments under VND3 billion as affordable for the average income in HCMC.

Cao Thi Thanh Huong, senior manager in its HCMC research department, says these apartments have the highest demand in the market.

Concurring, David Jackson, CEO of real estate firm Avison Young Vietnam, says affordable apartments are lucrative because they serve housing needs and are easy to rent out or resell.

These units are growing increasingly rare in the city as new supply declines and costs rise, according to analysts.

Statistics on real estate trading platform Nha Tot show that in July the average apartment asking price was above or very close to VND3 billion in most districts and Thu Duc City.

To buy under that threshold, people need to look in Districts 8, Binh Chanh and Go Vap, far away from the city center.

On the secondary market too, most low-priced apartments are concentrated in remote districts such as Binh Chanh and Binh Tan, leaving many people dissatisfied with the location.

According to Savills, only 18% of the new apartment supply in the first half of this year was affordable, with most located more than 10 km from the city center.

“Affordability will be a major challenge as less than 5% of the supply in the next three years will fall in this [affordable] segment.”

Jackson says undeveloped residential land is becoming increasingly scarce in HCMC, and their prices and clearance costs will likely increase once amendments to the Land Law take effect next month.

“New regulations are expected to resolve legal hurdles for hundreds of delayed or paused housing projects in HCMC.

“However, there is no guarantee that property developers will position these projects as mid-priced or cheaper.”

Hence, housing supply is unlikely to improve in the short term, he said, adding that prices are not expected to decrease either.

Savills says as supply remains constrained in HCMC, homebuyers there would gradually shift to apartments in neighboring provinces such as Binh Duong and Dong Nai.

In fact, the shift already seems to have begun: Customers from HCMC accounted for 80% of new apartment transactions in Binh Duong in the last six months.

Savills expects some 24,000 affordable units to be launched in these provinces in the next three years.