Why are apartment prices increasing?
According to Người Lao Động, despite the interest rate for home loans decreasing by half compared to the peak period, the real estate market in general has faced many difficulties, but apartment prices in major cities are still increasing. Nowadays, many people can hardly afford an apartment with prices ranging from 25-30 million VND/m2 in the inner city of Hanoi.
According to data from Batdongsan.com.vn in January 2024, affordable apartments in Hanoi are priced below 30 million VND/m2, an increase of 2% compared to December 2023. The prices of mid-range apartments also increased by 2%, reaching 30-50 million VND/m2.
Also according to Batdongsan.com.vn, with segments that meet real needs such as buying and selling, leasing of secondary apartments or retail spaces in the city center, many real estate brokers have been actively working immediately after the Lunar New Year. The scarcity of supply and the increasing demand have made transactions in these segments more vibrant after Tet.
Similarly, in Ho Chi Minh City, the prices of affordable apartments in January 2024 increased by 4%; the prices of mid-range apartments increased by 1% compared to December 2023.
Prices of apartments in the center of Ho Chi Minh City and Hanoi continue to maintain an upward trend, especially in the affordable and mid-range segments. Illustrative image from the internet
Speaking to reporters of Báo Người Lao Động, Mr. Nguyen Quoc Hiep, Chairman of GP Invest Real Estate Joint Stock Company, commented that apartment prices have been increasing unusually recently. The reason is the large demand from customers, especially young people, but the supply on the market is limited.
Mr. Quoc Hiep cited the example of a condominium project on De La Thanh Street, Hanoi, which his company built and put into use in 2012. At that time, the developer sold apartments at a price of 26-28 million VND/m2. Over 10 years later, the price of these condominiums has been sold at 50 million VND/m2, doubling the starting price. Similarly, The Nice Tower project on Pham Van Dong Street, Hanoi, in 2021, this company sold apartments at a starting price of 42-46 million VND/m2, and after 2 years, the price increased to 75-85 million VND/m2.
People’s income cannot keep up with housing price increases
According to VTV, the price of an apartment in the inner city of Hanoi is equivalent to 45 years of average income of laborers. Hanoi is therefore listed among the most unaffordable capital cities in the world. This is the announcement of NetCredit, a platform under Enova International technology company in the US.
According to a study by Savills Vietnam, in 2023, the average per capita income of Hanoi reached 150 million VND/person. Compared to 2019, the average income growth rate is 6% per year. Meanwhile, the price of apartments increased by 13% per year from 2019 to 2023.
Thus, the housing price increase is more than double the average income growth of the people, and this year’s trend predicts that housing prices will continue to rise sharply, far outpacing people’s income.
Forecast for further price increase in 2024
According to the Ministry of Construction, with the current population growth rate and housing demand, the country needs to increase by about 70 million m2 of urban housing per year to serve new urban households.
The real estate market from early 2023 until now has seen many segments experiencing decline or being “frozen”, but apartment prices continue to increase continuously, now reaching an average of 53 million VND/m2 in Hanoi.
Meanwhile, in Ho Chi Minh City, the market has shown signs of slowing down, but the prices are still high at 61 million VND/m2. Currently, apartments priced from 2 to 4 billion VND are in high demand.
It is very difficult to solve the problem of housing prices surpassing people’s income and prevent a strong price increase. Because with real estate projects, the investment preparation process usually takes a long time, which makes the supply not immediately available.
Many projects are stagnant due to legal issues; land prices are high, construction material costs are increasing; costs for land clearance, compensation are also increasing… all add up to push apartment prices to continue to rise.
According to real estate experts, if the supply is not improved soon, the pressure of apartment prices in major cities will continue to increase in 2024. Finding an apartment will be even more difficult for people with limited income, young families, and families moving from rural areas to cities not only this year but also in the years 2025 – 2026.
The shortage of supply continues to push housing prices even higher in the coming years. It is clear that comprehensive solutions are urgently needed because over time, the number of urban households will increase, not only due to urbanization but also due to changes in culture, especially the demand for “living separately” from large families by the younger generation.
