Forecast of apartment price trends before new orientations on service life

The orientation of regulating the term of use of apartments according to the construction age in Resolution No. 21-NQ/TW is assessed to create significant changes for the real estate market in the coming time.

Mr. Le Hoang Chau - Chairman of the Ho Chi Minh City Real Estate Association (HoREA) - said that the term of use of apartments should be determined according to the lifespan of the project and proposed to stipulate a maximum level of no more than 99 years. According to him, this is a term in accordance with international practice, similar to the housing model of the Singapore Housing Development Board (HDB), where people have the right to own apartments for a term of 99 years.

Mr. Chau proposed that the State allocate land for a long term, for example 99 years, for businesses to develop projects. Businesses then sell apartments to customers for a corresponding term. When this term expires, the land will be returned to the State for re-planning.

According to the Chairman of HoREA, this model brings two major benefits. First, house prices may decrease because apartments sold on a term basis will be cheaper than long-term ownership types, thereby creating conditions for many people with average incomes to access housing. Second, the renovation and reconstruction of old apartment buildings will be more convenient, avoiding prolonging the negotiation process between the State, investors and residents as it is now.

Mr. Chau believes that this is also the foundation to reshape the real estate market in the direction of taking utility value as the center, instead of considering housing as a tool for accumulation and super-profit speculation.

Although the project may expire its service life, according to Mr. Chau, the consistent spirit of Resolution 21 is to ensure the property rights of the people. This means that when the building is forced to be demolished due to no longer ensuring safety, the long-term land use rights still belong to the people.

From a market perspective, many experts believe that stipulating the term of use of apartments according to the lifespan of the building may affect the psychology of buyers in the early stages. Because most Vietnamese people still consider housing as a long-term accumulated asset, with hereditary value, so they always prioritize the factors of ownership and stability. Therefore, just the appearance of information related to limiting the term of use of apartments can make many people worried.

Besides psychological factors, many opinions also raise the question of whether the new regulation will increase demand for long-term apartments, thereby creating a "price fever" in the market.

Before this concern, Ms. Pham Thi Mien, Deputy Director of the Vietnam Real Estate Market Research and Evaluation Institute (VARS IRE), said that the possibility of a "price fever" is not high. According to her, the average apartment price in many major cities is currently very high, exceeding the affordability of the majority of people. Along with that, housing loan interest rates are still at a high level, causing purchasing power in the market not to really recover.

These two factors are directly affecting market liquidity. Therefore, it is very difficult to have a'price fever' just because of regulations on the term of use of apartments," Ms. Mien assessed.

According to her, anxiety when approaching a new policy is normal. However, when people understand the true nature of the regulation, their concerns will gradually be relieved. In the current context, real estate buyers are also increasingly more knowledgeable and not easily led by crowd psychology.

Ms. Mien believes that the current trend is that buyers are more cautious, and decisions are based on information and data analysis. Even with new mechanisms and policies, it takes time and a roadmap for implementation, so it is difficult to create "waves" like previous periods.

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