The development of the real estate market is not in line with the law of demand and supply and that is the main cause for high real estate prices in Hanoi.

At the seminar, “Developing real estates in Hanoi: opportunities and challenges” held in Hanoi on July 27, Deputy Minister of Construction Nguyen Tran Nam said that with a population of more than 7 million, the demand for housing, offices, infrastructure and services in Hanoi is huge.

Meanwhile, market supply does not meet demand. It is forecast that only 10-20 percent of the real demand for housing will be met in 2010. The lack of approval for Hanoi’s master plan and 800 delayed projects have also contributed to the low supply.

Vu Xuan Thien, deputy head of the Housing and Real Estate Management Department under the Ministry of Construction, pointed out other reasons for the high price such as the speculation and mob investing of short-term investors.

According to a report from the Construction Ministry, estate prices increasingly surpass their real value. For example, the cost for building a 20-25 storey apartment complex ranges from VND16.7-17.5 million per sq.m, but the transaction price in the market amounts to VND28-32 million per sq.m.

To meet the strong demand for housing and stabilise Hanoi’s real estate market in the future, deputy minister Nam said it was necessary to speed up the formulation of financial mechanisms for property market development, especially for housing development, amend policies and solve difficulties in implementing real estate projects.

VOVNews