Work is underway on the Trung Hoa - Nhan Chinh apartment building in Ha Noi. Developers are offering more affordable housing, yet people continue to hesitate when it comes to making home purchases. — VNA/VNS Photo Tuan Anh

HA NOI (VNS) — Developers are offering more affordable housing, yet people continue to hesitate when it comes to making home purchases.

About 95 per cent of units launched during the first quarter cost less than US$1,000 per square metre, compared with only 26 per cent in the same period last year, according to real estate company CB Richard Ellis Viet Nam (CBRE).

Prices fell in all segments, with some even plunging to half of the initial price.

But the disparity between income and the cost of homes presents a significant barrier to potential home buyers. Housing prices are often as much as 25 times the average income in Viet Nam.

According to CBRE, in neighbouring Thailand, in contrast, housing prices are only 6.3 times the average income.

The weak economy and developers' infrastructure difficulties also prevent people from buying homes.

Richard Leech, executive director of CBRE, said that the recent Government move to cut the deposit interest rate from eight per cent to 7.5 per cent would make savings less attractive and cause the money to flow into the real estate market instead.

He added that the State Bank of Viet Nam's decision to provide VND30 trillion ($1.429 billion) loans to low-income earners at a six per cent interest rate would also motivate more home purchases.

There would be more purchase inquiries in the coming quarter, as buyers now had much greater bargaining power, Leech said.

CRBE estimated that there were currently 21,600 apartments for sale in Ha Noi, a 5 per cent increase over the last quarter of 2012. Leech forecast that prices would continue to decrease by 1.5-2 per cent each quarter.

But about 60 per cent of 9,000 completed units in urban zones were still vacant, as a lack of infrastructure gradually reduced their value, according to CBRE.

The average prices of villas and townhouses declined 13 per cent and 9 per cent, respectively, said Do Thi Thu Hang from Savills Viet Nam.

However, many projects, like those in Me Linh and Hoi Duc districts, did not see any inquiries this quarter.

Urban zones must upgrade their infrastructure to attract buyers, according to CBRE.

Demand for residential apartments for lease is also increasing, fueled by students, State officials and young couples.

As for retail space, the 14,000sq.m Trang Tien Plaza re-opened last week.

However, Hang Da Galleria scrapped a planned upgrade and unoccupied retail space increased by 6 percentage points last year.

About 422,000sq.m of retail space would be available by the end of this year, CBRE estimated.

The completion of Cornerstone – an A-ranked office building in the city's centre –meant that 30 per cent of A-ranked buildings stood vacant.

Offices and serviced apartments for lease also faced pressure to cut prices and improve facilities, CBRE said. — VNS