The development of projects in the outskirts combined with transportation infrastructure will help reduce housing prices in the inner city.
House prices are very difficult to decrease
Research data from the Vietnamese Real Estate Brokerage Association (VARS) shows that the real estate market has been positively changing over time, but there are still many difficulties and challenges that need a long time to overcome. Especially the shortage of housing supply, especially in the affordable segment, with high demand.
Specifically, the total housing supply in the period from 2018 to 2022 continuously decreased, from 180 thousand units in 2018 (before the pandemic) to around 48 thousand units in 2022. In 2023, the total housing supply increased slightly, reaching about 55 thousand units, but only equivalent to 32% compared to 2018.
The structure of housing supply is increasingly unbalanced, with new projects being mainly high-end products, with prices from 40 million VND/m2, which is contrary to the scarcity of the affordable segment (<25 million VND/m2). Accordingly, the proportion of affordable housing decreased from 30% in 2019 to 7% in 2022 and 6% in 2023.
The imbalance of supply and demand has put pressure on the real estate market, especially the housing segment, continuously raising the price beyond the affordability of those who have real housing needs.
Market liquidity has decreased sharply, inventory has increased, causing real estate businesses to suffer from severe capital shortage. Many projects were not completed on schedule, falling into a state of stagnation, directly affecting 40 related industries.
Faced with that situation, the solution proposed and talked about the most is that real estate businesses need to reduce prices. Meanwhile, state management agencies need to study and develop a mechanism for taxing assets for speculative and accumulative subjects instead of those who buy real estate for the purpose of living or doing business.
The tax rate can gradually increase if real estate owners do not use real estate for business activities or do not carry out construction after receiving land.
However, at present, reducing the price of houses is not certain because the attraction of the city is too strong. Lowering house prices would also increase demand, pushing house prices back up and leading to other long-term issues for the economy.
Shift from the core to the outskirts
Mr. Nguyen Van Dinh, Chairman of VARS, believes that in the long term, house prices depend on the behavior and thinking of the market. The price will decrease when the demand is shifting to the outskirts, where there are advantages to create land funds and develop large-scale projects, helping projects to have better selling prices.
The trend of shifting from central areas to the outskirts has become clear in recent years. Many real estate developers have seized the opportunity and pioneered the implementation of large-scale projects such as Vinhomes, Ecopark …
VARS research data shows that housing supply in 2024 will increase again, thanks to the recovery of the market and efforts to resolve legal barriers for projects by state management agencies. New projects tend to spread to more distant areas, according to infrastructure-based planning. This is also the business strategy of investors in the context of land funds in central areas becoming increasingly scarce and limited.
If the traffic infrastructure is convenient and the connection to the suburbs is good, distance is no longer a consideration, then the trend of moving to projects in the suburbs is essential. This positive trend not only significantly reduces pressure on the urban core in terms of infrastructure but also helps projects have better selling prices thanks to advantages in land reserves for the development of large-scale projects. Thereby, reducing housing prices.
Therefore, state management agencies need to expedite the development of infrastructure investment projects. Expand the city, plan the development of satellite towns along with the implementation of key transportation projects, especially public transportation systems to minimize congestion for cities. At the same time, it is necessary to solve the issue of licensing time, real estate development procedures.
Regarding project development, it is necessary to carefully study the market’s demand to have a suitable and quality development orientation that matches the selling price and fulfill your responsibilities and commitments in building infrastructure.
