Supply "out of phase", risk of house price increase

The real estate market has just gone through a period of "stasis", when supply and demand both decreased sharply, project legal issues were entangled, and capital sources were blocked. Many businesses had to go through an extremely difficult period, cutting thousands of employees, and even temporarily suspending operations.

Mr. Le Hoang Chau - Chairman of the Ho Chi Minh City Real Estate Association (HoREA) - at a recent conference admitted that real estate businesses have learned "unforgettable lessons" after Covid-19.

After that, the company had to focus on restructuring, solving the capital problem, and promoting product development. The biggest problem, bond debt, was also handled "softly", thanks to the support of the Government and the State Bank with circulars extending debt repayment time and extending bond debt.

However, Mr. Chau is still worried that the real estate market in Ho Chi Minh City this year may continue to have an imbalance in housing supply and demand. 71% of the supply is still in the high-end segment, the rest is in the mid-range segment and there is a lack of affordable products and social housing, according to data as of the end of 2023.

Also due to legal problems accounting for 70% of the market's difficulties, Ho Chi Minh City has 148 real estate, commercial housing, and social housing projects that have not been able to complete investment, construction, and business procedures or have been suspended. As a result, more than 58,000 customers who bought houses in the projects have not been granted "pink books".

The shortage of housing supply may lead to high housing prices or high prices, in the context of increasingly scarce affordable housing and social housing. The Chairman of HoREA believes that real estate businesses need to promote product structure, focusing on affordable housing and social housing to increase liquidity, meet the real needs of people, and ensure healthy development of the market.

The "out of phase" market and the lack of affordable housing products are also among the challenges that Mr. Nguyen Xuan Quang - Chairman of the Board of Directors of Nam Long Investment Company recently mentioned. The "out of phase" between supply and demand in different real estate segments, the crisis of homebuyer confidence leading to reduced liquidity, and increased inventory are the problems that the market has to face.

In addition, according to Mr. Quang, businesses also face financial challenges when debts remain, and bond lots, although extended, will still persist in 2024 and 2025. Third is the legal challenge of the project when some laws are still overlapping. Meanwhile, the real demand for housing is still high, and the affordable housing and social housing segments still have opportunities to develop.

The phenomenon of "phase difference" between housing supply and demand, meaning that the market supply is skewed towards the high-end housing segment and there is a lack of affordable housing, has been warned by experts and representatives of management agencies for many years. Recently, opinions have been directed towards encouraging businesses to develop this "market-needed" product line.

According to many experts, affordable housing and social housing will be the real estate segment that will enter the first recovery phase this year. Demand in this segment remains very high, thereby promoting liquidity, soon bringing the market into a new phase after the crisis.

Many businesses enter the race

According to Savills' estimates and research model, in order to meet the housing needs of the people, Ho Chi Minh City needs about 50,000 apartments to meet the real housing needs and 60-70% of the total supply comes from the affordable housing segment. However, Ho Chi Minh City is short of these products and the supply is concentrated in neighboring markets such as Binh Duong, Dong Nai, Long An but may not be enough.

Apartment projects in the suburbs target customers in Ho Chi Minh City who buy for living and investment. The selling price of 2-bedroom apartments is around 2 billion VND/unit, very suitable for small families.

With such a large market, many businesses have quickly entered the race to expand the supply of this highly liquid product. Nam Long Company has implemented a strategy of focusing on affordable housing products that meet market demand, promoting support policies, handling inventory, and boosting sales. This year's target revenue is about 6,657 billion VND, coming from key projects in Ho Chi Minh City, Long An, and Can Tho.

An Gia Company firmly chooses to develop projects in the mid-range and affordable segments because it meets the market's needs. An Gia's leaders believe that this segment still proves its "invincible strength" even when the market is prosperous or frozen, meeting the needs of the majority of people and has high liquidity.

TT Capital Investment Joint Stock Company and two Japanese partners, Cosmos Initia (a member of Daiwa House Group) and Koterasu, have also launched a long-term joint venture to develop affordable real estate projects in Ho Chi Minh City and neighboring provinces. The joint venture announced that it will invest about 150 million USD in the next 5 years, aiming to bring about 1,000 affordable apartments to the market each year.

The joint venture also said it had completed capital contribution for a project near Vincom Di An, Di An City, Binh Duong Province with a scale of nearly 2,000 apartments, selling price under 2 billion VND/apartment. According to the latest information, the project is undergoing necessary procedures to be able to launch the market from the third quarter of this year.

Regarding social housing, the Government has a project to build at least 1 million social housing units for low-income earners and industrial park workers in the period 2021 - 2030. Many businesses have registered to implement this target and are gradually realizing it.

Novaland Group registered to invest in building 200,000 social housing units in Ho Chi Minh City and neighboring provinces. Hoang Quan Group aims to complete 50 projects, equivalent to 50,000 units by 2030. The number registered by these two units is equal to 1/4 of the total target that the Government is aiming for.

Previously, a series of large real estate enterprises such as Hung Thinh, Vingroup, Sungroup, Him Lam, Becamex… made commitments to build social housing. From commitment to reality, Vingroup has started many social housing projects in the North and Central regions.

The return of affordable housing and social housing may attract great interest from the market in the coming time. The supply of this product may explode in the suburban markets of Ho Chi Minh City in the next 1-2 years, relieving the "thirst" for home ownership for people with real housing needs.

However, in the context that 70% of housing supply is still in the high-end segment, market liquidity is difficult, and project legal issues have not been cleared, businesses still need a strong restructuring. Especially when the bond market has "soft landed" but the pressure of maturity is still there.

Therefore, many opinions say that businesses still need to plan to restructure products, continue to purify financial health, and strengthen the apparatus to have a healthier body before entering the new race.