Renewal plan spurs apartment prices

31 Jul
Owners of old apartments in the capital city of Ha Noi have found themselves sitting on increasingly valuable pieces of real estate.

Le Hoang Nam, the owner of a unit in a Giang Vo apartment block, wanted to sell his third-floor apartment to buy a new one but decided against it when he found out that the apartment block would soon be upgraded.

“Last year, I intended to sell my apartment for VND850 million [US$47,000] but someone offered to buy it for VND2 billion [$112,000],” Nam said.

Nam is one among thousands of old apartment owners who suddenly became dong billionaires when the city of Ha Noi announced plans to renovate and rebuild all of them through the year 2015.

The city’s decision has warmed up the local real estate market, turning old apartments into goldmines. Investors are trying to snap them up because they believe they can earn big returns once the buildings are renovated.

Demand for older apartments has risen by about 40 per cent, according to a report from the Ha Noi Golden Land Joint Stock Co.

The real estate sales manager of Energy and Mineral Joint Stock Co, Ngo Duy Hai, suggested that the reason for the spike in value of these properties was the official compensation policy.

For every square metre of old apartment, an owner would receive 1.3 sq.m of new apartment when the building was renovated, Hai said.

“The demand is increasing day-by-day, even with prices up 25 per cent,” said Ha Noi Golden Land director Doan Xuan Hai. “Infrastructure of these old buildings is stable and they often come near schools, markets and hospitals.”

Tran Trong Hieu, investment director of the International Investment and Urban Development Joint Stock Co, dismissed the idea that infrastructure was a factor in the rising value of these units.

“When they renovate the old buildings, they can’t improve all of the surrounding infrastructure systems,” said Hieu. “These systems were built a long time ago. They can meet the demands of small buildings, but if the buildings are expanded the infrastructure systems may breakdown.”

Source: Viet Nam News

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