Critics, realtors divided over super small flats

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A sample efficiency apartment introduced by the Dat Lanh Real estate Company in Ho Chi Minh City. The 20-square-meter apartment idea has stirred public controversy, with some critics saying it can end up creating "slums in the sky" (Photo by Nghia Pham)

A proposal to develop super small apartments in Ho Chi Minh City has elicited contrasting reactions, with some experts slamming the idea on social concerns and realtors welcoming it as move to boost a sluggish market.

The proposal, recently submitted to the Ministry of Construction by the Dat Lanh Real Estate Company, aims to build 100 efficiency apartments, each with an area of just 20 square meters, in HCMC's District 12 and sell them for only VND300 million (US$15,800) each.

Nguyen Van Duc, deputy director of Dat Lanh, said the apartments are suitable for single people. Many large cities around the world have developed studio apartments of around 20-30 sqm each, he said.

The Housing Law stipulates that an apartment must be of at least 45 sqm, but Duc said the regulation should be amended. There should only be a limit on space per person so that developers can build apartments based on customer demand, he added.

Duc said his company will put a condition in the contract that only allows one or two people to live in the small apartment.

Future slums

But experts are unimpressed with Dat Lanh's idea, saying it might end up creating "slums in the sky" that present more urban management problems.

An official of the Construction Department said housing demand in the city is now 14 sqm per person but will expand to 20 sqm in 2020.

According to Dat Lanh the small apartments are for single people but there are no regulations requiring them to move out after getting married or having children, the official said.

Overcrowded residential projects will have long-term social impacts, he said.

Architect Nguyen Truong Luu said the government has banned apartments of less than 45 sqm for a reason because basic needs like sleeping, eating, studying and socializing have to be met.

"If a family can't even manage to give their children a good place to study, how can they focus on learning?" Luu asked.

"Moreover, HCMC is working toward a stable urban structure with construction projects that can last at least 70 years. Approving super small apartments for short term purposes will go against such a goal."

Architect Luu Trong Hai said there is a real demand for small apartments but Dat Lanh's proposal needs to be considered carefully from the viewpoints of urban planning and management.

There are many possible ways to develop housing for low income residents, and it's not necessary to build very small apartments that impact larger city plans, he said.

Market boost

Industry insiders have responded positively to the proposal, saying it can help stimulate the local property market.

Good things don't always come to those who wait

Local developers need to work harder to make the market more attractive to foreign investors or the sector will never reach its growth potential, a real estate expert said.

"Vietnam's market is still young and every sector has potential, but how to make the market attractive (to foreign developers) is a tough question," Tran Nhu Trung, associate director of Research at real estate services provider Savills Vietnam, told Thanh Nien Weekly.

There has been a lot of discussion over how to improve legal frameworks and procedures, but local developers can help facilitate foreign investment instead of just waiting for the system to be completed, he said.

"Local developers need to show their cooperative spirit as a host," Trung said.

With China trying to cool its property market many developers there reportedly begun looking for opportunities outside China. Trung said such a trend may bring more developers to Vietnam.

However, he said an increase in the number of developers does not necessarily mean the market will improve.

After all, Chinese investors are "at the supply side," and "it's not sure how much they understand the Vietnamese market," he said.

"Not considering their possible negative impacts, apartments of between 20 and 40 sqm will certainly liven up the market because there is a real demand for them," Bui Tien Thang, deputy general director of Saigon Thuong Tin Real Estate Joint Stock Company, was quoted by local news website VnExpress as saying last week.

A sociological study should be carried out to understand this demand accurately, he said.

Many people, including civil servants, students and newlyweds, are having housing problems in HCMC, where property prices are at astronomical levels, Thang said.

While apartments of less than 45 sqm are banned in the country, there have been cases in which several people bought an apartment together and divided the space themselves, he said.

If developers are not allowed to break the size limit, small apartments will continue to appear anyway, he argued.

As the local market needs a diverse range of products, small apartments should be built on a trial basis, said Thang. "The problem is to manage them so that they are not overcrowded and messy."

While the high-end segment, accounting for 20 percent of the whole market, could not find customers, the 20 percent low-cost segment is highly sought after as supply is far short of demand, Nguyen Xuan Loc, deputy director of local asset management and real estate consulting firm Vinaland, told VnExpress.

"Apartments of 20 sqm are quite small and can be associated with sloppiness, but those of 30-40 sqm are worth a try," he said.

Sluggish market

Support for Dat Lanh's idea came amid a troubled time for the market which has experienced a longer than expected downturn since 2008.

Tran Nhu Trung, associate director of Research at real estate services provider Savills Vietnam, told Thanh Nien Weekly that facts and figures showed the local market was "sluggish" in the first quarter.

Signs of recovery had begun to appear in the third and final quarters last year and it can take between one to five years for a full recovery, he said.

"There have not been any clear adjustments in demand yet," he said. "Last year Savills Vietnam predicted that apartment size will shrink to attract buyers, but it's a surprise to see the size being reduced to just 20 sqm."

Deputy Construction Minister Nguyen Tran Nam said Dat Lanh's proposal is now under consideration but he supports the idea to build affordable housing to meet real market demand.

Nam said the Ministry of Construction had previously allowed Dat Lanh to develop apartments of 39 sqm and the product has been welcomed by the market.

As for the concern of building "slums in the sky", Nam said the issue related to management. Large apartments under poor management can also turn into slums, he said.

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