Cut-sized apartments to boost market liquidity

Hoa Binh Green City saw 200 units sold after it downsized the unitsPhoto: Duc Thanh

The Hanoi Municipal  People’s Committee recently took the decision to allow developers to downscale more than 4,050 units in order to provide cheaper and smaller apartments to feed the lower-income market segment. In order to be downsized, developers have to obtain permission to shift their stock from commercial to social housing projects.

The 4,050 units are spread across 14 commercial housing projects, and once restructured they will provide 5,976 units.

According to the Minister of Construction Trinh Dinh Dung, the high-end market is now hugely over supplied, while there remains massive demand for good value housing.

“Rescaling existing apartments will help developers ease inventories and help liquidity,” Dung said.

During recent years, developers have largely focused on developing high-end apartment projects, with prices reaching VND25 million ($1,200) to VND30 million ($1,430) per square metre for apartments of more than 100 square metres in area. These developers are now redesigning their units into smaller 45 to 70 square metre units as well as scaling back on fixtures and fittings to squeeze into the VND12 million ($570) to 15 million ($715) per square metre price bracket.

Hoa Binh Group’s Hoa Binh Green City saw 200 units (40 per cent of the total housing stock) sold after it downsized the units.

Some other projects are following this trend. Hundreds of units at Golden West were sold in a fortnight following their reconfiguration.

According to Nguyen Thi Dieu Hang, deputy general director of Vinaconex 3, downsizing has proved a reasonable solution, helping developers sell units which has helped them accumulate financial resources to reinvest into other projects.

Meanwhile Vu Cuong Quyet, general director of Dat Xanh North said that developers were struggling to sell larger units in a difficult market. Incoming finances from apartment sales would help projects meet their schedules and ease the pressure on bank loans.

However experts have warned that scaling-down apartment sizes won’t resolve all the problems.

According to Dao Ngoc Nghiem, deputy chairman of the Vietnam Architecture and Zoning Association, attention should be paid to the designs of the scaled down apartments. He said minimum living conditions needed to be ensured, including public space and facilities.

“The redesigned units would create stronger pressure on the local community when population density increased. This issue must be considered by policy makers, developers and buyers in order to map out better transportation infrastructure, and greater power and water supply needs and other relevant issues,” Nghiem said.

Meanwhile Nguyen Van Hai, director of the Hanoi Architecture and Zoning department warned developers to ensure the buildings that were being restructured were capable of coping with the changes and that power and water supply, drainage system and services were all amended to take into account the higher population density.