Low-cost housing demand is high, supply is low, investors are not very interested

Old apartment prices "escalate"

Limited supply, especially the lack of low-cost apartments, has led to a sharp increase in prices of many old apartments that were used 5-10 years ago. According to Lao Dong reporters at an apartment building on Nguyen Xien Street (Thanh Tri District - Hanoi), a 95m2 apartment with 3 bedrooms, 2 bathrooms, and fully furnished is being sold by a broker for 5 billion VND.

It is known that this apartment building officially came into operation at the end of 2017. This apartment building has been exploited and used for 7 years, but the selling price is up to nearly 53 million VND/m2, approximately the price of newly built apartments.

Ms. Nguyen Thi Dung (resident of Diplomatic Urban Area - Hanoi) said that due to personal reasons, she sold her apartment here in 2022 and earned a profit of up to 300 million VND after 4 years of use. However, she is very regretful because the price of apartments here is still increasing sharply.

"I bought an apartment in the Diplomatic Corps Urban Area in 2018. In 2022, I decided to move to the 789 Ministry of National Defense Building at 147 Hoang Quoc Viet (Cau Giay District - Hanoi) to live. At that time, when I sold the apartment in the Diplomatic Corps Urban Area, I made a profit of 300 million VND. I was surprised because old apartments without pink books still made a profit, but if I had to choose again, I would not sell because the apartments here still increased in price strongly" - Ms. Dung shared.

Similarly, Mr. Nguyen Van Tu (32 years old) said that he bought an apartment in Dai Mo ward (Nam Tu Liem - Hanoi) for 1.7 billion VND in 2021. Up to now, the apartment he is living in has been paid up to 2.5 billion VND, a profit of 800 million VND.

"Since I bought the apartment, the price of apartments where I live has increased quite rapidly. Even though I moved into the apartment I'm living in 3 years ago, there are still people who agree to spend 2.5 billion VND to buy it," said Mr. Tu.

Why are investors not interested in the low-cost segment?

Talking to Lao Dong reporter, Mr. Pham Duc Toan - General Director of EZ Vietnam Real Estate Investment and Development JSC said that investing in a real estate project in big cities like Hanoi and Ho Chi Minh City is actually very difficult.

"First, there are legal difficulties and the project implementation process. Then there are the huge investment costs, from the investment preparation stage to the site clearance stage and the land use fees are all very high. Therefore, when the land fund is gradually narrowing, there is almost no land fund in the inner city, the land fund in the suburbs also begins to be limited, then investing in low-cost housing will not be effective. The reason is that in the same land area, when investors can improve a little in terms of utilities, the construction quality and they sell at a high price, the profit is much higher.

This is a matter of interest for investors. As for building low-cost housing, it is essentially impossible to build low-cost housing now. The reason is that all other costs are increasing, and the expectation of building low-cost housing is that only the State will do it and through the form of social housing. If we build low-cost commercial housing now, it will not be effective for investors."