HCM City (VNS/VNA) - Supply of landed houses and villas in Ho Chi Minh City is short since developers are wary of this segment due to high costs and extended procedures, experts said.

Le Hoang Chau, chairman of the HCM City Real Estate Association, said in the last two years supply has stood at over 5,000 units a year, but has been modest this year.

He cited the huge investments required as the main reason.

Besides, profits are not high, especially since the tax in this segment is very high, and there is difficulty in selling them, he said.

Investing in condominiums brings higher profits, but the short supply in the ready-built landed house and villa segment means it would soon turn hot, he predicted.

One more reason for the short supply in the segment is that developers are moving gradually away from the city and to neighbouring provinces.

For instance, Hung Thinh Corp is developing Bien Hoa New City in Dong Nai province and a new project in Ba Ria - Vung Tau.

Studies by market researchers clearly indicate the short supply.

CBRE in its first-quarter report said, “The shortage of new supply in the ready-built townhouse and villa market in HCM City continued in the first quarter of 2019.”

In the first three months only 296 new units entered the market, comprising 28 villas, 167 townhouses and 101 shophouses. This was only equivalent to 42 percent of new launches in first quarter of 2018 though the number was almost double that of the previous quarter.

“The cumulative supply growth rate as of Q1 2019 was only about 2 percent,” the report said.

“While the growth of market scale in HCM City is declining strongly, the market in bordering areas of the city are attracting attention from buyers and real estate developers with relatively cheaper selling prices and larger supply.”

Due to the delay in licensing new projects and the decrease in unencumbered lands in HCM City, developers are focusing on high-value products.

“If there are no positive changes in the licensing process, the cumulative supply growth of the market in 2019 will remain low, below 5 percent per quarter,” CBRE predicted.

“In general, the ready-built townhouse and villa market is shifting to the suburban and bordering areas of HCM City, including Dong Nai, Binh Duong and Long An provinces.

“Positive updates on infrastructure projects connecting HCM City with neighbouring provinces are the main factors for price increases in these areas.”

Jones Lang LaSalle (JLL) Vietnam said: “Sales totalled 468 units in the first quarter of 2019, with the rates in new projects reaching 97 per cent. The demand for townhouse and shophouse products remains high, supported by strong demand from both owner-occupiers and buy-to-let investors.”

It added that new launches totalled 479 units, down 68.3 percent  year-on-year and all new launches in the first quarter came from small- to mid-scale projects.

Just like in the apartment market, the limited supply in the ready-built landed property market was also mainly attributed to the delays in granting the necessary legal documents to developers to launch projects, JLL said.

New launches in the ready-built landed segment are expected to top 4,600 units this year. The eastern area comprising districts 2, 9 and Thu Duc continues to lead the market in terms of new launches, with large projects such as Vincity, Senturia Rach Chiec and SimCity Phase 2 being the key contributors, the company said.

DKRA Vietnam said the supply in the market in the first quarter was as much as 30 percent of the same period last year.

The supply was mostly in districts 9 and 2, it added.

Experts predicted that the market would see a strong move in the third quarter when Vincity is launched.

Besides, approval from the city for 124 stalled projects would infuse life into the segment, they added.

At a recent meeting with developers in HCM City authorities gave permission for 124 out 150 projects which are under inspection to resume construction. — VNS/VNA