Condo division not a wise solution: experts

Some experts have cast doubt on the success of real estate enterprises’ reduction of condo sizes to clear stockpiles, saying that the solution may only help reduce financial burden of homebuyers while it still fails to drag down house prices.

The current Housing Law requires commercial apartments to be at least 45 square meters each. However, given the amended Housing Law the Ministry of Construction is fielding suggestions for, housing developers in Vietnam will get the green light to divide large apartments into smaller units for which they expect greater demand.

Some have raised concerns over huge supply of small-sized condos in the future given large apartment stockpiles in the country. According to the ministry, the nation saw a condo stockpile of around 27,800 units as of June, including nearly 6,200 units in Hanoi City and 12,600 units in HCMC.

Phan Thanh Mai, general secretary of the Vietnam Real Estate Association, said that apartments around the world are usually measured at 30 to 50 square meters each while a commercial condo in Vietnam is around 70 square meters. With limited finances, most customers cannot afford large apartments.

 

 

“In my opinion, investors should be allowed to choose condo sizes following market demands,” Mai said.

Pham Trung Ha, general director of Hoa Phat Land, said that if investors can decide condo sizes, the real estate market will see positive impacts.

This solution will help enterprises speed up sales and improve market liquidity. Hoa Phat Land also has plans to convert some projects into small-sized condos to reduce investment expenses.

According to the Ministry of Construction, investors registered to convert over 50 commercial projects into budget home projects as of August 31. Enterprises also sought approval to revise sizes of 6,000 commercial condos of 22 projects to turn out over 8,300 apartments.

However, many experts said that division of condos into smaller units will not help reduce prices. In contrast, condo prices may increase given this solution.

Tran Minh Tri, deputy director of Thu Do Trade and Investment Joint Stock Company, said that this solution will only support homebuyers. Meanwhile, enterprises cannot cut investment costs and have to spend more on re-building condo projects. Only firms building new projects can save construction expenses.

Some even said that this solution actually cannot help reduce sales prices per square meter although the total value of a condo has been lowered.

Nguyen Quoc Hung, director of a real estate trading center in Hanoi City’s My Dinh District, said building smaller apartment units would lead prices per unit to slide but the cost of each square meter built is not lower, or even higher than medium-sized apartments.

For instance, a condo measured at 53 square meters in Xa La is offered at around VND20-22 million per square meter, much higher than the per square meter price of a 70-square-meter unit.

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