Should apartment prices be based on grading?

Deputy Minister Nguyen Van Sinh recently claimed at a news conference conducted by the Ministry of Construction that there were no previous standards specifying what makes a high-end, ordinary, or economical apartment. However, a pricing range has been established: apartments priced under 25 million VND/m2 are classified as low-income housing, while those priced over 40 million VND/m2 are classified as high-end flats.

"This pricing framework was created to categorize projects, resulting in first, second, or third-grade apartments." Sales prices and condominium service costs will be determined based on this rating. "This approach ensures fairness and transparency," Deputy Minister Sinh said.

In fact, with each developer establishing various apartment pricing and each body offering real estate market statistics using their own criteria for apartment classification, buyers and investors have found it impossible to grasp market dynamics.

The present trend in inexpensive flats, for example, is luring purchasers since this category is in high demand. However, defining inexpensive flats as those with costs ranging from 25 million VND/m2 to less than 35 million VND/m2 begs the question of whether this sector exists in large cities at all. Especially when the average price of an apartment in Hanoi or Ho Chi Minh City's major market is approximately 60 million VND/m2. The concern is whether lower-priced flats would be considered cheap, and whether this price range is genuinely adequate for purchasers' financial capacities.

Professor Dang Hung Vo, former Deputy Minister of Natural Resources and Environment, argues that apartment grading should only be used as a guideline for purchasers and sellers when negotiating pricing and condominium management and operation costs.

According to Vo, building categorization should only be used to evaluate construction quality using standard criteria. Whether a high-quality or low-quality apartment is valuable should be determined by market demand and supply regulations. Of course, higher-quality apartments are frequently chosen and may fetch greater costs. Similarly, services within residences should be mutually agreed upon by consumers and service providers. Residents should be willing to pay more management costs if they want better services, and vice versa.

According to Dr. Dinh Trong Thinh, an economic expert and senior lecturer at the Academy of Finance, apartment prices are affected not only by fixed factors like planning, architecture, and technical infrastructure, but also by soft factors like location, market demand, buyer preferences, and the developer's brand.

Thinh underlines that pricing is only one of several considerations in determining whether an apartment is considered high-end or inexpensive. As a result, categorizing based merely on price is insufficient. Prices might also fluctuate on a regular basis, making it difficult to decide which category an apartment belongs in and at what price it should be sold. Instead, supply and demand laws must naturally control the market.

According to economic analyst Tran Nguyen Dan, there is presently "inflation" in the high-end apartment market, making it difficult for purchasers to determine the true worth of the property. As a result, apartment grading must be transparent and updated on a regular basis, with the flexibility to alter categories and levels. This provides purchasers and renters with an impartial foundation for understanding the items. A reputable organization should also supervise apartment grading, allowing consumers to participate in the product price process.