Shortage of affordable housing, surplus of high-end housing
Mr. Hoang Hai – Director of the Department of Housing and Real Estate Market Management, Ministry of Construction – said that currently there are almost no projects in the low-cost apartment segment (below 25 million VND/m2) on the market, mainly in the mid-range and high-end apartment segments (from 25-70 million VND/m2). Among them, the selling price of affordable apartments ranges from 25-35 million VND/m2; mid-range apartments are priced at around 35 million to below 50 million VND/m2; high-end apartments are priced above 50 million VND/m2, common at 60-70 million VND/m2.
Data from Savills shows that out of every 100 newly sold apartments in Hanoi in 2023, only three have prices below two billion VND. The shortage of affordable housing has reached its peak in 2023 as most of the new projects launched are in the mid-range and high-end segments. In terms of the total new supply released last year, the high-end apartment segment accounted for 75% in Hanoi and 84% in Ho Chi Minh City.
Despite the economic difficulties, apartment prices continue to rise sharply. |
Mr. Nguyen Van Dinh – Chairman of the Vietnam Real Estate Brokers Association – sees an increasingly imbalanced product structure in the housing market, with a dearth of affordable commercial housing. If in 2019, this segment accounted for 30% of the total new supply, now it is only about 6%. The price range below 25 million VND/m2 only exists in social housing projects or projects in suburban areas.
According to Mr. Dinh, the short supply is unlikely to increase in the short term, so the paradox of a shortage of affordable housing and an excess of high-priced housing may persist this year. Legal barriers make the regulatory authorities more cautious in approving projects, but they also make it difficult for businesses to sell their inventory, not having the resources to pay off debts and develop new projects.
Housing prices rise despite economic difficulties
When the real estate market started to decline in mid-2022, expectations of price adjustments similar to the 2008-2009 period surfaced. Especially in 2023, when the market encountered comprehensive difficulties, expectations of price reductions surged even higher. However, data from various research units show that selling prices of apartments and landed houses continue to rise steadily and reach new highs, regardless of the general economic difficulties.
According to the latest statistics from Savills, Hanoi’s apartment market at the end of 2023 recorded prices ranging from 51-70 million VND/m2 – setting a new price threshold, accounting for 63% of the new supply, up 24% compared to the same period in 2022. Apartments in this price range accounted for 49% of the total units sold. The price of landed houses increased by 3% per quarter, reaching 194 million VND/m2 of land. The price of commercial townhouses also increased by 3% per quarter, reaching 328 million VND/m2 of land.
According to Ms. Do Thu Hang – Senior Director of Research and Advisory Department at Savills Hanoi, the villa, townhouse, and commercial house market is facing significant challenges as all indicators are in negative growth while prices continue to rise. In 2019, low-rise houses below 20 billion VND accounted for 80% of the total supply, but by 2023, it only represents 50% of the total supply. The prices of products over 30 billion VND in 2019 accounted for only 10%, but by 2023, it has reached 23% of the total market supply. This is a very high price range, while the rental business potential for townhouses is facing difficulties.
Mr. Nguyen Quoc Anh – Deputy General Director of Batdongsan Channel – said that contrary to the expectation of a significant decline in real estate prices in 2023, the overall market benchmark slightly increased by 6% compared to the beginning of the year. This situation may continue to challenge the housing market in 2024 due to the difficulty of releasing new supply in the short term. Meanwhile, there are many reasons why housing prices are soaring, such as objective factors (increased input costs including land, materials, and interest rates) and subjective factors (developers prioritizing high-end luxury housing).
Experts warn that continuously rising housing prices, beyond the affordability of most people, may have negative consequences for the market, such as the formation of artificial price ranges, market imbalances, and declining liquidity.
Ngoc Mai
