5 pressures weighing on the apartment market after the Carina apartment fire

Huynh Phuoc Nghia, Deputy Head of the Faculty of International Business - Marketing at the University of Economics, Ho Chi Minh City, said that the recent fire at the Carina apartment building that killed 13 people is changing people's consumption and apartment investment behavior.

This expert pointed out difficulties for the apartment segment in particular and the entire real estate market in general for at least the next 6-12 months because of the psychological impact of concern that will cover the apartment market.

Apartment boredom

For those considering buying an apartment, the Carina fire could become a psychological barrier that causes consumers to withdraw their purchase intention. Customers will spend a lot of time researching and surveying the project and at the same time raise safety issues that they have never or rarely mentioned before.

For those who have already paid for a purchase, payment may be delayed (progress delayed) until questions about fire safety are satisfactorily answered. For apartments that have been put into operation, the way the fire protection system is operated continues to be an important factor in keeping residents staying or selling their homes elsewhere. It can be said that the consumer behavior of home buyers will change dramatically after the Carina apartment fire.

Apartment sales must include fire safety solutions

The change in homebuyer behavior forces investors to flexibly change their marketing and sales methods. To sell apartments at this sensitive time (the fire just happened a few days ago), investors are forced to change their approach to customers compared to before.

If in the past, businesses focused on promoting prime locations, baiting with hundreds of amenities, landscapes, embellishing with vivid 3D images, high profit opportunities, now investors must commit to complying with safety standards first. These standards are quite long and do not exclude selling apartments with presentations, fire prevention and fighting drills, and advice on escape solutions inside the building. This pressure is necessary because it promotes the apartment market to develop more sustainably.

Apartment liquidity may decline

In the short term, due to the psychological shock from the fire still spreading, the apartment market may face a decrease in purchasing power and consumption capacity. This is a normal reaction. The shortest period of impact is 6 months and the longest is one year. After this sensitive period, the apartment market will gradually stabilize and improve, adapting to the increasingly high demands on fire safety. In general, this is a pressure that can cause difficulties for the market in the short term but has a positive impact in the medium and long term for the apartment market.

Local oversupply pressure

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The Carina apartment fire occurred on March 22, which means there are only ten days left until the end of the first quarter of 2018. This is the time when most real estate companies have begun to announce new project information or officially launch their products to the market. There are three scenarios that will affect the supply of apartments after the apartment fire. First: the investor still launches the products for sale but the purchasing power is not as expected. Second: the investor postpones the re-sale plan, waiting for the panic to subside. Third: the group of customers buying apartments for investment may sell their products.

However, for the group of customers buying apartments to live in, as long as the product is good, meets fire prevention and fighting standards, the investor is reputable, has a strong commitment to fire safety, and has specific solutions that go with the product, the opportunity to sell is still very high. Because the demand for housing that is both convenient, modern and meets the payment ability of the majority of people such as the apartment segment is always very large.

Carina fire could push land prices higher

Although not many, there will be a group of apartment investors (buying to rent, buying to wait for price increase to sell for profit) who will start shifting capital flow to other channels to avoid psychological impact after the Carina apartment fire. The top target of these investors is safer channels, which can be townhouses and land.

The shift in investment channels from apartments to land in the short term can make the real estate market even hotter due to the sudden increase in supply. Therefore, the apartment fire is like a catalyst, adding fuel to another fire, which is to fan the land fever.

Mr. Nghia believes that in the short term, the above pressures could be a barrier that causes the market to stagnate. However, businesses only need to overcome this difficult curve and implement strong commitments on the safety of apartment buildings, then the apartment market will soon be vibrant again and have many opportunities for sustainable development in the medium and long term.