Creating a new flow for investing the low-cost housing

VCN- The shift to the low cost housing investment is positive, creating balance for the segments and more sustainable stability to the real estate market, while creating a new flow of investment, attracting other investors to participate for competition. This is the opinion of Mr. Nguyen Ngoc Thanh (pictured), vice President of the Vietnam Real Estate Association during a conversation with the Customs Newspaper on the issue of low cost housing. 
creating a new flow for investing the low cost housing

Sir, recently the Vingroup announced to be building from 200,000 to 300,000 low-cost housing units in the next 5 years. This news has shocked the market because demand for this segment is growing and also by far, Vingroup mainly concentrate on the high-end housing. How do you think about this information?

First of all, there are the differences between the segments and between supply and demand on the market. This is due to the development process in a natural way, the investors mainly focus on the high-end housing segment in the last 2-year period. Obviously, that investment is creating a large amount of supply and also good for the market. However, there are also some shortcomings since the high-end housing demand is not as big as low-income and low-cost housing segment. Investments in low-cost housing segment requires the investors to be more closely calculating, because demand is huge but the liquidity is potentially inadequate. Likewise, by the end of 2016, according to the Vietnam Real Estate Association, at present, the supply of low cost housing segment is lower than demand.

Therefore, when the Vingroup announced their strategy to focus on the low-cost housing segment in the next 5 years, I think this is a good sign for the market. This is a large and prestigious investor, who succeeded in the high-end segment, as well as in various forms from resort to apartment, entertainment service projects, so I believe they did research on the market to be able to offer a strategy and plan for transition from the high-end to low-cost housing segment, because to have this transition is not simple. This is a transition step in the field of investment to meet the needs of Vietnam’s society. The market need a pioneer and the Vingroup is a fit pioneering investor in this field. Moreover, this is a good signal for the market since consumers will have more choices in the future, because there are many people need low cost housing but still have to stay on the sidelines.

In your opinion, how this information will impact to the market and to other investors in building strategies for their businesses?

As I said, this is a new leading step of investors in the market. They succeed in the high-end segment and so far I think they saw a larger opportunity in the segment of low cost housing. I think they have realized, in the market economy, they must sell what the market needs, so they adjusted their technology, capital, product structure before deciding to launch this product. As the pioneers, these investors will induce other investors so that creating benefit for consumers and for the social development. I believe investors will succeed in this shift. But we still need to wait for the effective of this investing model if it is suitable with the market or not, because as I said above, this segment is very difficult to invest with a lot of risks and not simple. The increasingly fierce competition so that if not carefully studied the market without a standard investment plan and a reasonable calculation, the cost and quality of the product will be in conflict with each other and will be at risks in accessing the market needs. We wait for them to make plans with specific products to be assessed more fully.

Moreover, the housing despite high, low or cheap prices, has a crucial binding conditions to the success is location. All of the beautiful locations have been occupied by the high-end segment. Over the years the market has operated very efficiently, thoroughly the nice locations, now look to other locations to invest the low cost housing segment is a second difficult problem. Usually the beautiful locations will be served to develop the high cost segments to increase profitability, while the ability to increase profitability of the low cost segment is not so high, so will companies dare to choose the beautiful locations to develop the low cost segment? This is a challenge of not only investors but also the State management agencies in planning the urban development. Will authorities dare to build the low cost housing in the beautiful locations? This relates to the issue of using land efficiency, we will have to balance the multifaceted program to make low-cost housing development in these locations so that consumers can choose. Apart from the low price segment, we still expect investors to pay more attention to the low cost housing segment for the low-income people. This is an urgent issue of the current social needs.

With this shift, in your opinion, how the low cost housing segment in general, including social housing in the market will look like in the future?

In my opinion, the outlook in this segment will be changed. With the social housing segment, we have the preferential policies system, but the market still has not got enough houses for people in need, because there are many shortcomings, and investors do not find opportunities in this segment. One of them is shortcoming on credit since it is a backbone for the social housing segment. Hence, the need to continue to study the solutions to overcome the deadlock in the credit, to create a new openness policy to attract the active participation of the investors. Currently, the Vingroup as well as many other large companies do not really boldly embarked on the cheap housing, but only the low price housing (it is still the commercial rather than social housing). Most companies are participating conservatively and cautiously on this segment. In my opinion, in the one hand, the State need to supply more policy to facilitate further development of this segment, while investors also need to be more responsible when implementing the investment policy in the low price and social housing.

As for the cheap price housing, the State has issued a policy to this segment. Most recently, the Prime Minister has directed very positively to focus investment in the segment of cheap price housing and housing for the low-income people. The State’s policies for this segment is already, but investors are not interested.

Thank you!

By Thu Hien/ Huu Tuc

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