Record land prices in HCMC new urban area will impact all housing segments
The winning bids for four lots in the new urban area of Thu Thiem, District 2 ranged from VND 470 million to VND 2.4 billion per square meter, which is 4 to 8.3 times more than the starting prices of the city. December 10 auction.
In the city center in District 1, the current highest land price is VND 1.5 billion per square meter.
Tran Khanh Quang, managing director of real estate company Viet An Hoa, predicted that the record price would spark a new land fever. In the past, such land fevers were short-lived, but the news might last longer as more land auctions are expected to take place in the coming times, he said.
Huynh Phuoc Nghia, senior expert at Global Integration Business Consultants Company, said the high winning bids would encourage investors of real estate projects on the Thu Thiem Peninsula to review and increase their sale prices as well.
Rising prices for land, villas, houses and apartments on the peninsula will increase prices in neighboring areas in the short term, especially in the town of Thu Duc; and even through HCMC in the long run, he said. Before the auction, many people predicted that property prices in HCMC would increase by around 30% in 2022.
Nghia said many people were concerned that land prices were inflated above their real value. The price of high-end properties built on land costing VND 2.4 billion per square meter would reach tens of billions of VND even for one-bedroom apartments, several times higher than the current market price.
“The price of virtual land will deprive industries that use space like commerce and manufacturing of growth opportunities, which is not beneficial and may even hurt the economy,” Nghia said.
Le Hoang Chau, chairman of HCMC Real Estate Association, said that after the land price record on December 10, the concept of downtown HCMC has officially changed.
People traditionally view the city center as District 1 surrounded by Nguyen Hue, Dong Khoi, and Le Loi roads, which has historically had the highest land prices. With land prices on the Thu Thiem Peninsula exceeding that, the downtown area can be understood as a larger area that includes areas along both banks of the Saigon River, Chau said.
The potential increases in land prices will pose great challenges to HCMC’s plans to stabilize house prices and could block them altogether, he said, adding that the increases would directly affect all segments of the real estate market.
In the immediate term, the price of the luxury and super-luxury real estate segments will set a new price point and the selling prices of the high and mid-range segments will follow, he predicted.
In the two years that Covid-19 has hit the city, almost no low-cost housing projects have been implemented, Chau noted. As land prices rise, input costs for low-cost housing projects will rise, forcing investors to abandon this segment, he warned.
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