Developers should take heed of the supply and demand story in Ho Chi Minh City.
The Vietnamese residential market in Ho Chi Minh City is experiencing its usual hive of activity as the end of the year approaches. This flurry is expected to continue into 2017 however developers may need to reconsider their business model in order to satisfy demands. This is according to the Ho Chi Minh City Real Estate Association (HCMCRE).
There has been substantial influx of properties that fall under the high-end sector of the market. A section that not so long ago saw little supply ensuring that prices and competition remained high. However the HCMCRE’s recent report has identified an imbalance with supply outstripping demand.
The price bracket that saw the most amount of demand was at the lower end of the market. The sector, for social housing and properties costing VND 15 million or USD 666.67 per square metre, has a vast shortage according to the HCMCRE as high-end projects are being built not only in the city centre but in outlying districts too.
The chairman of HCMCRE, Le Hoang Chau, has commented, “The Government should have policies to balance the market and developers should restructure their projects, moving into segments with real demand and high sales”.
In order to keep any market buoyant it is vital that each tier is adequately catered for. The rising property prices in some of the world’s cities such as London and New York, are blamed for the distinct lack of supply and the scarcity of land that pushes up prices even further. It is important that developers ensure that there isn’t an glut of one type of property that could easily influence property prices in the future.
These recent findings by the Ho Chi Minh City Real Estate Association should not be taken lightly. Whilst forecasting a positive start to 2017, to protect the market in the future and to avoid a bubble, developers and investors should take a step back to consider their options before plunging in.