Predominance of luxury housing sparks doubts about sustainability

By Trung Tin   May 5, 2021 | 06:00 am PT
Predominance of luxury housing sparks doubts about sustainability
An artist’s impression of a luxury apartment project in District 1, Ho Chi Minh City. Photo courtesy of Keenland.
An increase in the number of luxury apartments this year has sparked fears of oversupply and market unsustainability.

The luxury segment accounted for 39 percent of total apartment supply in HCMC in the first quarter, and the high-end segment for 20 percent, according to data from real estate consultancy CBRE.

Even half a decade ago luxury housing had accounted for a mere 1-2 percent of the market.

The first quarter also saw the highest ever price for an apartment of $18,000 per square meter and the emergence of branded residences or luxury apartments associated with international management brands.

But surveys have found that prices are likely to keep rising to new highs this year.

In a report on the HCMC housing market in the first quarter, property firm DKRA said the supply of luxury apartments is still on the rise and could set new price milestones. In the super luxury segment, projects could even reach $20,000-30,000 per square meter in the central core area in the city’s District 1.

Duong Thuy Dung, senior director at CBRE Vietnam, had predicted last year that luxury housing prices in Vietnam could increase dramatically in the next 10 years and reach $35,000 per square meter.

By last year the price of luxury and super luxury apartments in Ho Chi Minh City had climbed to $10,000-15,000.

The starting price in the luxury segment is $4,000, but the average price in the first quarter of 2021 was nearly $6,898 after increasing by 4.7 percent from a year earlier.

CBRE data shows that between 2017 and the end of 2019 prices of luxury apartments in the city’s central area increased by 40 percent.

Vietnam is emerging as a thriving real estate market in Southeast Asia, with HCMC being among locations where housing prices are increasing rapidly.

In fact, recent data from real estate consultancy Savills shows that Vietnam is among the 10 fastest growing property markets in the upscale segment.

Vietnam is also emerging as a country with rapid growth in affluence and demand for upscale properties.

However, the spurt in prices and supply, which shows no signs of stopping, is causing concern about luxury apartments and branded residences developing at too fast a rate, causing the market to overheat.

Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association, expressed concern that standards are not being spelled out for luxury, super luxury and branded residences and most lack guidelines or regulation.

Tran Khanh Quang, general director of real estate investment firm Viet An Hoa JSC, said luxury housing and branded residences are still in a sweet spot with price records being constantly broken, resulting in plentiful supply amid a scarcity otherwise of products in the market.

Nguyen Loc Hanh, general director of Ngoc A Chau Real Estate Investment JSC, said the luxury apartments segment has become so large that it accounts for a 39 percent market share.

It is the leading segment in the HCMC real estate market, and the city should be cautious since it is not sustainable, he warned.

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