Townhouses are still hard to sell despite price reductions

Continuously reducing prices

According to Thanh Nien reporters, in recent months, the number of individual townhouses in areas that used to be hard to find such as District 7, Phu Nhuan District, Binh Thanh District, Tan Binh District... for sale at reduced prices is increasing sharply. It is worth mentioning that while there are many sellers, there are quite few buyers.

Ms. Phuong Di (living in Nha Be District, Ho Chi Minh City) said that for nearly a year now, she has been selling her 3-storey house with a land area of ​​140 m2 with the price reduced from 13 billion VND to 12 billion VND. Although many customers came to see the house and "nodded" in praise of the beautiful house and good price, the transaction was still unsuccessful. Not only reducing the price, Ms. Phuong Di said that if the customer is willing to buy, she will give away all the furniture in the house. In case the customer does not take the furniture, she will deduct it from the selling price.

"Many customers came to see the house. Everyone praised the house as beautiful and the price was good, but the amount of money was quite large, so customers hesitated. Because if they bought it, they would have to borrow from the bank, and now few people have such a large amount of cash in their house. However, during this period of economic recession, income decreased, so having to borrow from the bank to buy a house made customers feel discouraged," said Ms. Phuong Di.

Many townhouses, despite price reductions, still have difficulty finding customers.

In Tan Binh District, Mr. Tuan is selling a 42 m² house on Ly Thuong Kiet Street with an initial price of 4.3 billion VND, but now the price has been reduced by 800 million VND to 3.5 billion VND. Although he has signed a consignment with many brokers and advertised it everywhere, the house has not been sold yet. Not far from Mr. Tuan's house, also on the alley on Ly Thuong Kiet Street, Ms. Diem is selling her own 4-level house for 3.8 billion VND and is still negotiable.

In Tan Thuan Ward, District 7, a house with an area of ​​nearly 30 square meters was put up for sale by the owner at 5 billion VND in early 2023, but no one bought it. Up to now, the owner has reduced the price to 4 billion VND, but it still cannot be sold even though this house was newly built and the alley can be accessed by cars. According to Mr. Trong, a real estate investor in District 7, Nha Be District, many "overwhelmed" investors have had to put up for sale many real estate properties at quite cheap prices. However, at this time, the economy is difficult, cash is scarce, so everyone is holding on to cash to be safe.

"At this time, anyone who has cash or seed capital, can borrow from the bank to buy "overwhelmed" houses and wait for the real estate market to recover, that's number one. I'm also hunting for street-front houses whose owners are "overwhelmed" by the bank to exploit for rent or buy back resorts for business. Bank loans at this time have an interest rate of about 6 - 7%/year. If you borrow for 2 years, the interest rate is about 12 - 14%, and many banks even have cheaper interest rates. Meanwhile, the prices of many houses for sale have decreased by 10 - 20%, even lower than the general market level. Therefore, if anyone has cash, they don't have to borrow from the bank, or even borrow a little from the bank, to hold those properties, and when they sell them later, they will definitely make a profit. Especially real estate located on the street front that can be rented out. The rental income can cover part of the interest rate," Mr. Trong calculated.

The market will recover in the second quarter.

According to most experts, the townhouse segment in existing residential areas in Ho Chi Minh City is currently facing liquidity difficulties despite sharp price drops. Real estate expert Tran Khanh Quang analyzed that townhouses worth VND20-30 billion are often difficult to trade despite price reductions. Meanwhile, houses priced at VND5-7 billion are difficult to sell because it is difficult to rent out the premises. If in previous years, the market had good transactions at the end of the year, it is still quite "sunk" now. Because the majority of people who buy townhouses are investors who rent out to have cash flow and wait for prices to increase. While these people already own many assets and the investors themselves cannot sell, they are hesitant to buy more.

If the price of a street-front townhouse drops 30-40%, it can be sold immediately, but if it drops slowly, it is still difficult to sell. Real estate that can be rented out and generates cash flow is easier to sell and more popular; or service buildings for rent, offices for rent that are reduced by about 20% can be sold immediately. Small 2-3 story townhouses are very difficult to sell.

Real estate expert Tran Khanh Quang

"If the price of street-front townhouses drops by 30-40%, they can be sold immediately, but if they drop slightly, they will still be difficult to sell. Real estate that can be rented out and generate cash flow will be easier to sell and more popular; or service buildings for rent and offices for rent that are discounted by about 20% will be sold immediately. Small 2-3-storey townhouses are very difficult to sell. Currently, there are positive signs, many people go to see them, many people want to buy them but are still hesitant, afraid that the economy is still difficult and the market has not recovered yet," Mr. Tran Khanh Quang predicted.

Meanwhile, talking about the reason why townhouses have decreased in price but there are still few transactions, Mr. Dinh Minh Tuan, Director of Batdongsan.com.vn in the southern region, said that there are 4 factors. First, low-rise real estate types have prices much higher than the average income of people. If you buy, you need a large amount of money and often have to borrow a part. While the current economic recession affects income, high interest rates make this segment difficult to find buyers.

Next, there is a trend of finding a safe, open living space. With that price, going a little further to the suburbs will buy a larger house with good space, area, landscape and infrastructure. Another group chooses apartments to live with full amenities and safety instead of being crowded in narrow townhouses. Finally, the profit margin of this type is not as high as expected. The demand for renting private houses is less than apartments, the current increase in selling price and investment profit is no longer as fast as land and satellite townhouses; leading to a decrease in investment demand for this product group.

Most opinions also acknowledge that although bank loan interest rates have dropped sharply and the market is on the path to recovery, investors are still hesitant and continue to wait for deeper price reductions, causing liquidity to decline. Normally, when the real estate market is sluggish, it is also when the economy is in a difficult period, so people tend to hoard cash or deposit savings in banks. Therefore, the recovery of liquidity in this segment depends on the profit exploitation rate and access to bank capital as well as the ability to reduce interest rates. Many comments say that the economy is recovering, interest rates are falling sharply, so this segment may become active again in the second quarter of 2024.

According to statistics from the online real estate listing site batdongsan.com.vn, in the third quarter of 2023, the selling price of this type decreased by an average of 3-6% compared to the previous quarter. Specifically, Binh Thanh District decreased by 1%, Binh Tan decreased by 6%, Tan Binh decreased by 2%, Tan Phu decreased by 2%, Thu Duc City decreased by 5%, District 12 decreased by 2%...

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