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Vietnam's Focus on Luxury Housing Risks Affordability Crisis

Ha Nguyen

   HO CHI MINH CITY - Look around the cities of Vietnam and it is not hard
   to find luxury apartments valued at millions of dollars, while down the
   same streets, there are crumbling huts with faded metal sheets for
   roofs. The low end and the high end of the country's real estate sector
   are well established, in other words, but what about everyone else in
   between the two extremes?

   Affordable Housing getting harder to find

   The emerging middle class and working class in fast-growing Vietnam are
   creating ever more demand for new housing. If this market demand is not
   met, the country could experience the kinds of affordability crises
   seen in countries from Brazil to Ireland.

   The numbers suggest that affordability is not the top priority. Recent
   data from the Vietnam unit of Jones Lang LaSalle Incorporated, a
   commercial real estate services firm, show that there are more
   apartments in the luxury, premium, and mid end segments that have come
   on to the Ho Chi Minh City market this year, but not as many apartments
   in the affordable segment.

   Efforts to attack the problem

   But some real estate developers are starting to pay attention to this
   demand. Phu My Hung Development Corporation, which focuses on middle
   class buyers, is raising 1.7 trillion Vietnam dong, worth about U.S.
   $75 million, through a bond issue to develop a township in a rural area
   about 60 kilometers away from Hanoi.

   "With this investment, we are now well-positioned to focus on
   developing new, integrated townships in a number of secondary
   provinces, starting with Phu Hung Khang township, as part of a
   sustainable growth model," said Gary Tseng, the chief executive of the
   Phu My Hung Development Corporation.

   The real estate developer takes its name from an area of southern Ho
   Chi Minh City known for organized urban planning. Tseng referred to the
   Phu My Hung area as a model of "a sustainable city with efficient
   water, power, and transit solutions" that "can and should be
   replicated."

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