Revived Projects with Sharp Price Increases: A Comprehensive Overview of the Situation and Challenges

In recent years, the trend of reviving stalled real estate projects due to legal issues has created a new phenomenon in Ho Chi Minh City’s property market. These projects, many of which lay dormant for years, are now being restarted with significant price hikes, often ranging from 20% to 50% compared to their pre-suspension prices. This not only energizes the market but also introduces systemic challenges for investors and consumers alike.

Revived Old Projects: A Broad View

One of the most notable examples is the revival of the DatXanhHomes Riverside project (formerly Gem Riverside) in Thu Duc City. This large-scale project, developed by Dat Xanh Group, began in 2018 with thousands of apartment units initially priced at 33 million VND/m². After a long suspension due to legal entanglements, it has now resumed with projected prices up to 100 million VND/m². This nearly threefold increase from its initial price underscores a significant shift in the pricing structure of the local real estate market.

Similarly, the Metro Star project in Thu Duc City, by CT Group, has officially resumed after design adjustments raised its height from 15 floors to 30. This optimization has boosted the project’s value and market interest, driving prices from 38-40 million VND/m² to around 60 million VND/m². This increase exemplifies the strong upward shift in the premium apartment market in the area.

Another case is the Lavida Plus project in District 7, developed by Quoc Cuong Gia Lai. Previously, this project faced several years of delays due to legal issues. Initially launched in 2018 with prices around 33 million VND/m², it has now resumed after clearing legal hurdles, with prices reaching 55 million VND/m². This reflects the price increase trend in central real estate markets, driven by high demand for quality residential products.

Analyzing Price Increases: Costs and Financial Structure

According to Pham Ngoc Thien Thanh, Deputy Director of Research and Consultancy at CBRE Vietnam, the higher prices for revived projects primarily aim to offset the costs and resources spent during the legal approval process and re-launch phase. The extended suspension period has led developers to endure substantial financial losses and cash flow pressure. Price increases are not merely a commercial strategy but a necessity to ensure break-even points and achieve anticipated profits.

A senior executive at a real estate company in Ho Chi Minh City shared that the financial structure of a project typically involves 30% equity from the developer, 30% raised from customers, and 40% in loans from financial institutions. When a project is stalled for five years, the 15% annual interest rate on borrowed capital can lead to cumulative losses of up to 30% of the initial investment. This excludes additional legal costs, compensation for customers, and ongoing interest payments to banks. These factors compel developers to adjust prices upon project revival to avoid serious losses.

Other Factors Exerting Pressure on Real Estate Prices

Apart from individual project factors, the increase in real estate prices in Ho Chi Minh City is also driven by several external factors. Firstly, the scarcity of clear land is pushing land prices upward. Large-scale projects often seek prime locations where available land is increasingly limited, significantly raising development costs.

Secondly, construction material costs, labor costs, and credit interest rates have all surged recently. Especially with tighter legal regulations and stricter construction quality requirements, the costs of project implementation continue to climb. Consequently, developers must adjust prices to offset these costs and ensure a minimum profit margin.

According to DKRA Group's forecast, residential prices in Ho Chi Minh City, particularly for apartment and townhouse segments, will continue to rise in the near future. The limited supply, coupled with strong demand, has created an environment where property prices can only move upward. This trend reflects not only land scarcity but also the economic and social realities of a rapidly developing city like Ho Chi Minh City.

The Land Law 2024 and Its Impact on the Real Estate Market

The Land Law 2024, with new provisions granting local authorities the power to set land prices according to annual market valuations, is considered one of the main drivers behind the upward trend in apartment prices in Ho Chi Minh City. The market-based valuation mechanism has raised land prices in major cities, consequently increasing development costs. This has compelled developers to raise prices to ensure profitability and cover the significantly higher input costs.

Vo Hong Thang, Deputy General Director of DKRA Group, believes it is unlikely that real estate prices in major cities like Ho Chi Minh City and Hanoi will decrease, especially given the high demand for housing and challenges in launching new projects. The difficulties in securing clear land, prolonged legal procedures, and rising input costs have placed significant pressure on the market. For essential housing projects, Thang predicts that “prices will only increase, not decrease,” reflecting the current market dynamics.

Market Outlook: Opportunities and Challenges

Reviving once-stalled projects with sharply increased prices is an inevitable trend in line with market fluctuations and rising costs. However, this also poses a series of challenges for those with genuine housing needs, especially middle- and low-income groups. With the supply of apartments priced under 3 billion VND nearly disappearing from the market, owning a suitable home has become a distant dream for many residents.

A survey by DKRA Group indicates that the supply of apartments priced under 3 billion VND in Ho Chi Minh City has nearly vanished, with this segment expected to account for less than 5% of total supply in the next three years. This puts many potential homeowners in a position where they cannot access housing in major cities, particularly as real estate costs continue to escalate. This presents a significant challenge in addressing housing demands and calls for government policies to effectively regulate the market.

Given the current market scenario, except for speculative real estate on the outskirts, essential residential properties like apartments and townhouses in major cities are expected to maintain a price increase trend. This increase reflects the supply-demand reality as well as the complex dynamics of a developing real estate market. Price, land availability, and input cost pressures demand reasonable adjustments from developers and appropriate policy interventions from the government to create a stable and sustainable environment for all stakeholders.