Middle-income flats have bright future

April 29, 2011 | 16:23

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Apartments for middle-income people offer a major growth segment in the domestic market for the coming time, say experts.

These include apartments measuring from 60-100sq.m and priced around VND800 million - VND1 billion ($38,090 -$46,619) and are primarily located in new urban areas, they say.

Nguyen Van Duc, deputy director of the Dat Lanh Property Ltd Company, said many property companies developed apartments for middle-income people replacing luxury apartments in investment strategies, because of high demand and their rapid rate of return on the invested capital.

Pham Thanh Hung, deputy general director of the Cen Group, said the new wave in middle-income housing from investors was due to the difficulties they were facing in raising enough capital for luxury apartment development due to high interest rates. This was also compounded by a current glut in the supply of luxury apartments.

Investors in the luxury apartment sector could face 5-7 years before registering return on their investment. Meanwhile, middle-income apartments would need only two to three years, he said.
According to the Dat Lanh Property Ltd Company, 80 per cent of total apartment transactions was focused on the trade of apartments for middle-income people with an average value of around VND1 billion in the Ho Chi Minh City market.

Dang Van Thanh, a property expert in HCM City , said this kind of housing had proved suitable for lower earners, as investors had not spent much on the interiors and the buildings were generally located in the suburbs.

A shift to middle-income earner apartments would heat up the domestic real estate market that had slowed to almost a halt, Hung said. However, buyers of these apartments also face problems, as interest rates for bank loans are still far too high. Potential co-operation between property investors and the banks to provide subsidised interest rates is highly anticipated.

Meanwhile, Le Chi Hieu, chairman and general director of Thu Duc House Development Company, said it was difficult to cut apartment prices because inflation had forced up the price of material and labour in construction.