Low-cost housing helps revive real estate market

Low-cost housing helps revive real estate market

The real estate market's recovery will be led by low-cost housing and land plot segments this year, according to market analysts.

They say their assessment is based on rising demand for these kinds of properties and the government's recent changes of policies encouraging development of these market segments.

The prolonged economic slowdown has seen a sharp fall in demand for luxury homes. Also, increasing competition in this segment has seen many developers shift their focus to affordable homes so as to meet market demand and diversify their risk.

There is a huge gap between demand and supply of low-cost homes. By 2015, the total housing shortage in urban areas is estimated at 891.8 million square metres, more than three-fourths of which will in the low-income segment.

To meet the market demand and help real estate developers settle their inventory problem, ministries and sectors have started implementing several new policies, particularly supporting development of the low-cost housing segment.

One of them is the Ministry of Construction's Circular No 02/2013, which allows enterprises to change the apartment structure of commercial housing projects to make them more affordable.

Other policy incentives include a decision to set up a Real Estate Investment Trust (REIT) this July that would, according to Deputy Construction Minister Nguyen Tran Nam, help mobilise idle money from society and ease the current capital shortage in the real estate market.

Nam said those contributing to the REIT should be those experienced in making "professional investments".

These policies have been welcomed by both individuals and enterprises because changing the apartment structure creates more opportunities for low-income earners to buy apartments, while the trust fund will help developers mobilise much-needed capital for their projects.

However, the main catalyst in reviving the local real estate market is likely to be the recent cuts in lending rates, experts say.

Dang Hung Vo, former Deputy Minister of Natural Resources and Environment, said the lower lending rates would have an impact on people who really need houses to live in as opposed to making speculative investments.

There would be more people who want to take advantage of this opportunity and withdraw their savings from banks to buy houses, he said.

Many commercial banks have already lowered the deposit interest rates to around 7.5 per cent per year, suggesting that lending rates could drop to 10 per cent per year as the central bank expects.

In addition, the central bank's decision announced last month to pump VND30 trillion (US$1.4 billion) into five banks to enable them provide loans on easy terms to home buyers and social-housing developers has prompted the launch of several preferential credit packages.

According to a circular issued by the State Bank of Viet Nam on March 14, buyers of low-income housing, including government workers and military personnel, can borrow loans at just six percent interest for the first three years for buying houses with an area of less than 70sq.m that cost no more than VND15 million per square metre.

BIDV has unveiled a VND30 trillion ($1.44 billion) package for developing social housing projects while Sacombank and HDBank have come up with VND1 trillion ($48 million) and VND1.5 trillion ($72 million) packages respectively, aiming to boost the low-cost housing segment.

Observers expect more credit packages targeting the real estate market in the coming time, sparking hopes of a much-awaited recovery.

In addition to the low-cost housing segment, land plots, particularly those that have developed infrastructure, are attracting long-term investors since they have "soft prices" and can be used for various purposes.

For now, more transactions relating to land plots are taking place in provinces neighbouring HCM City, like Long An and Binh Duong.

Binh Duong is considered to the most attractive place to invest in land plots since infrastructure development is advanced in the province compared to other places, with the emergence of many new and modern urban areas.

Land plot transactions in the province's residential areas including My Phuoc 1, My Phuoc 2, Eastern Land and Bencat Center have recently increased significantly, and this has led to steady increases in prices as well.

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