“New Price Competition”
According to the review by the Vietnam Real Estate Brokers Association (VARS – Vietnam Real Estate Association – VNREA), urbanization is happening rapidly in major cities, leading to a sharp increase in housing demand while land supply is decreasing due to slow project implementation caused by funding policies and market control measures. As infrastructure and public services improve, the value of urban land increases, which in turn continuously sets a new price benchmark for apartments.
Overwhelmed by the increasing price of apartments.
Research data from VARS shows that the price index for apartments in Hanoi has increased by about 38 percentage points compared to 2019. In Ho Chi Minh City, the increase is 16 percentage points. Apartment prices in Hanoi have been continuously increasing in both the primary and secondary markets, while prices in Ho Chi Minh City have also started to rise again, with a gradual decrease in high-end and luxury projects in the secondary market.
The strong demand for housing comes not only from the shifting needs of city households, but also from the increasing influx of workers and students to the cities for work and education, especially in Hanoi. Additionally, there is a large amount of investment demand as rental prices for old and new apartments in residential areas continue to rise after the COVID-19 pandemic, amidst the rapid market recovery.
Statistics from Batdongsan.com.vn (Vietnam’s No.1 Real Estate Information Channel) show that the overall interest in buying apartments nationwide in January 2024 increased by 66% compared to the same period in 2023, and the number of real estate listings also increased by 46%. Specifically, the search volume for apartments in Hanoi in January 2024 increased by 71% compared to the same period. Similarly, in Ho Chi Minh City, the demand for apartment searches also increased by 59%. This trend is happening in most other provinces and cities as well.
Despite the strong increase in housing demand, the supply of apartments has not kept pace. In Hanoi, the new apartment supply for the entire year of 2023 is estimated to reach 10,500 units, a decrease of about 31% compared to the previous year. In Ho Chi Minh City, the supply of new apartments is expected to reach nearly 7,500 units, a decrease of more than 50% compared to the same period in 2022.
The decline in apartment supply in recent times is due to the increasing scarcity of newly approved real estate projects, while ongoing projects are facing difficulties related to legal issues and funding. Despite the efforts of the Government, ministries, and local authorities, some notable results have been achieved in terms of increasing the number of projects and restarting them in 2023. However, cash flow pressures still persist for real estate businesses.
Expectations for NOH projects
After a long period of decline, the supply of apartments in both major cities, especially Hanoi and Ho Chi Minh City, is expected to increase again thanks to market recovery and efforts to resolve legal obstacles for projects managed by state agencies, especially affordable housing for workers. However, this supply needs time to complete the necessary legal procedures before being brought to the market and primarily comes from areas far from the city center.
VARS predicts that in the short term, apartment prices in the city centers of major cities will continue to rise, especially in the affordable and mid-range segments. However, prices for high-end projects may experience a slight decrease.
VARS expects that with the current positive market conditions, by mid-2025, when new real estate laws with new regulations that ease the burden on developers and buyers of affordable housing are passed, the supply of affordable housing will increase and apartment prices will become more suitable for people in need of housing.
Based on research, to achieve the goal of completing affordable housing projects in 2024, the Ministry of Construction has requested developers to prepare schedules, allocate resources and finances, and apply new technologies to shorten construction time. For selected affordable housing projects, developers are urged to promptly prepare dossiers for design, technical, and fire safety assessments, as well as selecting consultants and contractors in accordance with approved plans from local authorities.
In addition, developers have the responsibility to provide and publicly disclose information related to the projects for people to know, register, and supervise. At the same time, along with the urgent commencement of construction, developers should ensure the progress of completing projects on 20% of the allocated affordable housing land as regulated. Businesses proactively review the target audience and conditions, register with the provincial People’s Committee, and announce the list of preferential loan recipients from the VND 120,000 billion support package.
As of the beginning of 2024, the 6 provinces in the country with the most affordable housing projects started construction are: Bac Ninh with 15 projects and 10,500 units; Bac Giang with 5 projects and 12,475 units; Thanh Hoa with 9 projects and 4,948 units; Dong Nai with 8 projects and 9,074 units; Binh Duong with 7 projects and 6,557 units; and Hai Phong with 7 projects and 11,678 units.
