HCM City enters ‘new age’ of luxury home sales
(VOV) - Ho Chi Minh City is sailing into another real estate boom with construction of residential housing units picking up steam throughout the metropolitan area and buyers snapping up new homes just about as fast as they hit the market.
Four years ago, the market collapsed with unsold property inventories hitting a staggering US$6 billion at its peak in 2013.
Now inventories have been cut in half and successful real estate transactions are moving at a blistering pace with their numbers nearly doubling from a year ago.
“There has been a broad based recovery in the market in 2015,” said Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association and there are 657 active residential real estate projects at present.
Chau said the high to ultra-high end residential market has seen the most active growth in terms of sales of new units with property brokers reporting they are selling more of these units in one month than they did in the whole of last year.
Nam Long Investment Corp has broken ground on a project that will provide 8,000 high to ultra-high income housing units by 2017, with the financial backing of the World Bank (WB)’s International Finance Corporation (IFC).
The Flora Anh Dao project is located at Do Xuan Hop Street in District 9, adjacent to District 2 in HCM City said Chau, adding that it is a joint venture among Nam Long and two major investors from Japan – Nishi Nippon Railroad and Hankyu Realty.
Creed Group, a Japanese real estate firm specializing in property development, has in turn signed a financial agreement to provide An Gia Real Estate Investment and Development JSC US$200 million to build residential housing in the city.
In addition, Gamuda Land based out of Malaysia has taken a 40% stake in a US$1.1 billion high end luxury 7,300 unit housing project in Celadon City, which had been stalled but is now back on track.
Gamuda Land took over the interest of three Vietnamese stakeholders on a huge international quality project that spans 82 hectares and includes a cultural and entertainment centre, education, commercial and sports facilities.
When the last bubble burst in the city, buyers and developers defaulted on loans, leaving banks crippled by toxic debt and unable to provide credit to tens of thousands of failing businesses, said Chau.
However, Chau cautions the government, needs to provide better oversight of the market boon this time around to ensure it does not come crashing down like the last one.
The development of the property market is skewed, Chau said, with too little housing at the low to mid-income level and too much at the high to ultra-high income end, which creates the risk of another housing bubble.
A few things that mitigate against a bubble include the fact that the underlying demand for housing is strong, with HCM City having one of Asia's fastest rates of middle class expansion.
The banking industry is currently being restructured with a US$1.4 billion stimulus package for the real estate industry and more and more Vietnamese are buying homes on credit than ever in the history of the nation propping up demand for housing.
The economy has also grown at an estimated 6.28% in the first half of this year - the fastest pace since 2008, with more transnational firms relocating high level executives and staff to Vietnam buttressing demand for housing.
The government is implementing a bevy of reforms aimed at improving the real estate market, not the least of which is that as of July 1— the rules on investment by foreign firms, foreign buyers and Overseas Vietnamese have been relaxed.