The local real estate market has been struggling for longer than expected as prospective home buyers opt to wait for prices to drop further, industry insiders say.

They said high lending interest rates of up to 17-18 percent in recent months have discouraged many people from taking loans to buy houses.

 

The slow recovery of the market is in fact a surprise as analysts had predicted a rebound this year after a decline of more than two years.

 

But apartment sales continue to be sluggish, even though it is estimated that demand is around three times higher than housing supply.

 

According to a report by UK real estate service provider Savills, only around 1,800 of 9,000 apartments available in Ho Chi Minh City were sold in the first three months this year, down 48 percent from the final quarter of 2009. The market is still gloomy, the company said.

 

Vu Quoc Thai, director at local research firm VietRees, said home buyers with real demand for houses believe that developers have set prices high to gain huge profits. So they will not purchase homes until they see prices being cut.

 

Another realtor who wished to be unnamed said home buyers have also become pickier. “They used to pay attention to prices only, but now they also study carefully the competence of developers, contractors and project managers as well as materials and designs... As a result, it takes longer to close a deal, leading to low liquidity in the market.”

 

Matthew Koziora, marketing manager at real estate company VinaCapital, said the luxury apartment segment with prices of more than US$2,000 per square meter was almost completely ignored by home buyers while only a few transactions were recorded for $1,500 per square meter apartments.

 

Pham Van Hai, general director of Asia Commercial Bank Real Estate Company, said only the medium price segment can lift the market from current gloom as the real demand is for apartments priced at around VND15 million ($790) per square meter or less.

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