Real estate businesses struggling to find affordable land for development as affordable housing options decrease over time

"Despite the business's preference for affordable housing to cater to a large number of buyers, it is currently challenging to find suitable land for this segment," said Mr. Ngo Quang Phuc, CEO of Phu Dong Group - a company specializing in developing affordable housing, recently shared.


Land funds for affordable housing are increasingly scarce.

According to Mr. Phuc, businesses understand and want to do more affordable housing projects. However, businesses have to consider three factors: land cost, construction cost, and profit expectations. Among these factors, only profit expectations can be flexibly adjusted by the investors, while construction costs and land costs are fixed. Not to mention, there are many other factors that affect the cost of product composition.

Currently, real estate businesses are having difficulties in finding land funds that are both affordable and suitable for project development. As a result, apartment projects priced below 2 billion VND per unit in Binh Duong province could become scarce in the near future. “Apartments priced from 30 million VND/m2 currently may increase to 35-40 million VND/m2 in the near future,” Mr. Phuc cited.

In reality, the concern about a lack of affordable land funds is not unique to any real estate business. In recent times, many developers have encountered difficulties in accessing land funds and creating reasonable product prices. Many businesses accept the idea of reducing profit expectations to lower the product price, but in the long term, objective costs still increase, making the issue of price a considerable challenge for real estate businesses.

According to some real estate businesses, the State’s focus on developing land funds for businesses to participate in bidding and auctioning is a necessary solution to create a transparent, fair, and healthy investment environment.

It should be remembered that in 2021, there were forecasts that apartments priced at 1.5 billion VND were at risk of becoming extinct in the suburbs of Ho Chi Minh City. This has been proven over the years, as in Binh Duong and Dong Nai, the majority of apartment prices have reached over 40 million VND/m2. A 50m2 apartment has the lowest price of 2 billion VND per unit if calculated at a price of 40 million VND/m2.

Recently, there are only a few remaining apartment projects priced below 1.5 billion VND per unit in Binh Duong. This means that with such rare prices, this period is the “last” opportunity to own reasonably priced housing before prices increase even further in the near future.

Recently, in Di An area, the Phu Dong SkyOne project has attracted attention as it offers an opportunity for affordable housing in Binh Duong and Ho Chi Minh City, given the shortage of supply in the market. The expected selling price for each apartment in this project is from 1.4 to 2.2 billion VND per unit, of which 75% are apartments priced from 1.4 to 1.8 billion VND per unit. After obtaining the construction permit in late November 2023, the project began excavation and construction until now. The latest deadline is the end of the second quarter of 2024, when the project will be completed. On March 20, the project will hold a meeting with the distributing agents. By the end of June 2024, the project will be put into operation.

In its recent forecast, the Vietnam Association of Realtors (VARS) emphasizes that apartment prices will continue to increase by about 10% in the next year until there is more supply of affordable housing available in the market. According to this unit, the affordable and medium-priced apartment segment has become increasingly attractive to investors as rental prices and selling prices continue to rise without signs of stopping. In the last months of 2023, the affordable housing segment serving real demand is expected to regain growth momentum, even maintaining continuous price increases in a difficult market.

Real demand for housing remains high, while the supply of affordable housing is increasingly scarce. Photo: Illustration

According to VARS, the constant increase in apartment prices for sale and rent in recent times has broken the stereotype that investing in apartments is a “non-performing asset.” In the past, most people believed that apartments were a type of investment that did not generate profits but only losses. Currently, investing in apartments for rent has become a popular trend in major cities, as it provides a stable monthly rental income – higher than saving deposit interest rates – and benefits from the potential for price increases.

VARS predicts that the prospects of the apartment market become clearer as production and business activities are gradually recovering, leading to high demand for housing in major cities. However, the supply of affordable and medium-priced housing continues to be scarce, still a major challenge for the real estate market.

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