Real estate developers' myopic focus on rich homebuyers has virtually ruined the Ho Chi Minh property market by shunning the low-income segment, where demand is highest, according to a city investment official.
Thai Van Re, director of the city's planning and investment department, was quoted by news website VnExpress as saying that developers should have built affordable homes instead of wasting money developing projects for the middle and high income segment, in which supply already far outweighs demand.
"Even though this is the developers' decision to make, I still think they should reconsider their business strategy. It's not right to build apartments that they can't sell even after cutting prices," he told a meeting with representatives from the municipal People's Council, which acts as the city's local legislature.
Le Manh Ha, vice chairman of the Ho Chi Minh City People's Committee, said home prices have to be cut to as low as possible to stir up demand. Ha said that in order to do so, developers should stop competing against each other by offering exceedingly high land prices to secure good sites for their projects.
Property brokerage Knight Frank said in a report last week that despite the continuing positive signs in the economy recently, with inflation appearing well under control and lower interest rates, the real estate market in Ho Chi Minh City continues to stagnate.
"A lack of liquidity and difficulties obtaining credit from the financial institutions continues to be the major hurdle for potential home buyers and developers alike," the report said.
"The limited credit available to the real estate sector from the banks has continued to hinder development activity and has culminated in the banks with available funds, generally only providing credit to well located, high quality projects."
Knight Frank also said that while investors are still active in the market, they are constantly hampered by "unrealistic asking prices and complicated ownership structures."
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