Real estate experts said most of the flats on sale were in the upper price range, whereas demand was for more affordable accommodation for those on low-incomes.
Over the last three months, there were 15 new real estate projects launched in the capital. However, of the 5,500 apartments scheduled to be built, 1,500 are in the upper price range, 3,400 in the mid-price range and just 600 for low-income earners.
Sales were also hit by tightened credit policies and the flow of investment from housing to gold or savings, experts said.
"The majority of demand comes from young couples working in the capital who are currently renting," said Nguyen Quoc Khanh, general director of DTJ Investment and Distribution. He added they were only interested in apartments costing less than VND3 billion (US$124,800).
Khanh said 80 per cent of the 200,000 prospective buyers last month were only interested in apartments ranging from VND15 million to VND22 million per square metre in Tu Liem, Hoai Duc, Thanh Tri, Hai Ba Trung, Gia Lam, Thanh Xuan and Ha Dong districts.
Khanh said supply for affordable accommodation in these areas far outstripped demand. Only the Ten Viet and Nam Do projects in the west of the city would cater to this demand, he said.
He said home buyers were also getting fussier about building quality standards.
He added that the continued tightening of monetary policies would further hit the real estate market.
Do Quang Huy, deputy head of Hapulico Real Estate Trading Floor's Marketing Department, said there was a wait-and-see sentiment among buyers.
Tran Ngoc Tuan Anh, from Viglacera Land, said property builders looked for middle- and long-term loans whereas banks were currently only lending for the short-term.
Repayment
Anh said repayment of loans typically fell at the end of the year and that a number of real estate developers, particularly smaller ones, would find themselves in financial difficulty.
However, he said it was currently a buyers' market as 67 new real estate projects were likely to be launched in the next three years, while 15 more were due for completion before the end of 2011, supplying about 1,000 apartments.
Demand for affordable housing was likely to continue for some time as half the population is under 35 years old.
The average asking price of the whole market decreased 1 per cent against the previous quarter, according to Savills Viet Nam Ltd Company's quarterly report.
The asking price in Cau Giay and Thanh Xuan districts was unchanged from last quarter, while the average price in Hai Ba Trung, Hoang Mai, Gia Lam and Long Bien districts rose 3-4 per cent. The remaining districts of Ha Noi saw price decreases of 2-8 per cent.
The CB Richard Ellis Viet Nam Ltd Company said market sentiment was relatively low, forcing developers to offer incentives, such as price discounts and removal of CPI pegging.
Phan Thanh Mai, director of real estate trading floors, said property developers were being hit by high interest rates and that many had been forced to halt projects.
Mai said developers needed to meet market demand for price and location.
Do Thu Hang, chief of Savills Viet Nam's research and consultancy division, said banks' credit tightening had hit the real estate sector particularly hard.
Foreign real estate service providers in Viet Nam said HCM City was experiencing similar difficulties and that demand in the second quarter had fallen off.
If mortgages were not availabe buyers don't buy, real estate agents said.
Demand should pick up when interest rates came down, said Nicholas Holt, deputy director of Knight Frank Viet Nam's market research division.
Potential buyers were adopting a "wait and see" approach, due to difficulties accessing credit and expectations of price reductions, he said.
Meanwhile, Truong An Duong, head of Savills Viet Nam's HCM City's market research division, said: "The tighter monetary policy has lowered the affordability of property, thus lower-priced apartments are seeing the most activity."
Holt added that the biggest demand was for units in the range of $35,000 to $60,000.
Adam Bury, CBRE's senior manager for research and consulting, said demand for mortgages was at an all-time low.
Meanwhile, high interest rates have put tremendous pressure on developers to offer big discounts or flexible payment terms, he said.
CBRE statistics showed the average asking price in the secondary market had also fallen.
In the luxury end, prices fell by $1,900 to about $4,500 per square metre in the second quarter of the year from a high of $5,000 in 2007.
There were small changes in the mid – and lower-end.
During the second quarter, six apartment projects entered the primary market in HCM City, a significant drop from 14 new projects during the previous quarter, according to Savills Viet Nam.
VNS
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