New HCMC apartments priced at $4,000 per sq.m due to affordable supply shortage

A 3.8-hectare project with 2,000 apartments on Mai Chi Tho Street in Thu Duc City was launched in May at VND130 million (US$5,110) per square meter.

So a single-bedroom apartment costs VND6-7 billion and a two-bedroom unit, VND9-10 billion.

New units in existing projects are also fetching high prices. A project on Nguyen Co Thach and Tran Bach Dang streets in the Thu Thiem area was offering apartments at VND125-175 million per square meter in early May.

In March a new building within an existing project in District 7 had units at VND88-100 million.

In Thu Duc City, a similar offering will soon hit the market at VND127 million.

The average price of a new apartment in HCMC has risen by 2-3% since the end of the first quarter to VND82 million per square meter, according to real estate firm Dat Xanh Service.

Prices have either remained unchanged -- at high levels -- or increased slightly, according to Vo Hong Thang, director of consulting and project development at property consultancy DKRA Group.

Data from DKRA shows the absorption rate of new supply was high at around 62% despite the prices.

David Jackson, CEO of Avison Young Vietnam, said the price rise is due to a prolonged lack of new supply.

In the last four quarters most of the new supply came from existing projects.

Statistics from the city Department of Construction indicate that only two apartment projects were approved in the last two years and just one in the last quarter.

Developers are focusing on smart amenities and services and positioning their projects at the top end to maximize profits, Jackson said.

The city is increasingly lacking mid-priced and affordable apartments as a result, he said.

"Recent sales of units at above VND100 million per square meter show that developers are determined to maintain price levels despite a stagnant market."

Concurring, Thang said selling their projects as premium products means developers have to invest more in amenities and quality, meaning there is no reason for prices to decline.

Rising costs and drawn-out legal procedures are also keeping prices up, he added.

He expected the southern market to have 2,000-3,000 new apartments in the second quarter, mostly in HCMC and Binh Duong Province.

High-end supply would dominate the HCMC market, while affordable units would mainly be available in neighboring provinces, he added.