Foreign real estate services providers in Vietnam agreed that the market of apartment for sale in Ho Chi Minh City continues to experience difficulty because of weak demand in the second quarter.

Demand is currently being restricted by the availability of mortgages, especially from Vietnamese lenders.

This underlying demand is expected to be unleashed as interest rates are reduced to more practical levels, according to Knight Frank Vietnam market research deputy director Nicholas Holt.

Many potential buyers are hesitating or adopting a “wait and see” approach due to difficulties accessing finance and expectations of future price movements, according to Holt.

“The tighter monetary policy has lowered home buyers’ affordability, thus lower-priced apartments are seeing the most transactions,” said Savills Vietnam’s Ho Chi Minh City market research division head Truong An Duong.

Holt, however, noted that demand was strongest in the affordable segment, with well designed, smaller units in the range of US$35,000 to US$60,000 attracting strong interest.

Fewer buyers could complete all cash transactions while mortgage loans were proving even less popular than ever before.

Thus, tremendous pressure is being placed on developers to offer big discounts or flexible payment terms, according to CBRE senior manager for research and consulting Adam Bury.

CBRE statistics showed decreases of the average asking price across apartment segments on the secondary market.

For luxury-grade apartments, it fell to less than US$4,500 per sq m in this year’s second quarter, from a high of US$5,000 in 2007. It fell to around US$1,900 from US$2,300 respectively for high-end apartments. There were small changes in the mid-end and affordable apartments.

In the second quarter, six apartment projects entered the primary market in Ho Chi Minh City, a significant drop from 14 projects in the previous quarter, ording to Savills Vietnam.