High demand, limited supply
In accordance with the research data from the Vietnam Real Estate Brokers Association, the price of apartments in Hanoi is expected to increase by about 38% in early 2024 compared to 2019. Meanwhile, in Ho Chi Minh city, the price of apartments is expected to rise by 16%.
Specifically, the prices of apartments in Hanoi have been continuously increasing in both the primary market (sold directly by developers) and the secondary market (resales). Similarly, apartments in Ho Chi Minh city have also started to experience an increase in prices along with a slow decline in prices of high-end luxury projects in the resale market. The price hike is driven by the continuously growing market demand. Furthermore, a survey conducted by Batdongsan.com.vn indicates that the overall interest in apartments nationwide in January 2024 has increased by 66% compared to the same period in 2023, while the number of real estate listings has also risen by 46%.
An increase in the supply of social housing would help cool down the price of apartments. Photo: Nyu Y.
According to Ms. Do Thu Hang, Senior Director of Research and Consulting Department at Savills Hanoi, the housing prices in Hanoi are currently at a very high level. The average price of a primary apartment in the market is around 58 million VND per square meter. The reasons behind the continuous surge in apartment prices in Hanoi, as pointed out by Ms. Hang, are the high construction costs and infrastructure development that push up real estate prices. Additionally, legal obstacles continue to hinder the supply of apartments. In 2023, the supply of new apartments reached the lowest level in 10 years, with just over 10,000 units available.
Mr. Nguyen Van Dinh, Chairman of the Vietnam Real Estate Brokers Association, forecasts: “In the short term, the prices of apartments in the city centers will continue to rise, especially in the affordable and mid-range segments. Meanwhile, the resale prices of high-end luxury projects may experience a slight decrease.”
Mr. Nguyen Van Dinh, Chairman of the Vietnam Real Estate Brokers Association, believes that despite the strong increase in housing demand, the supply of apartments has not kept up, and even experienced a decline in the two major markets of Hanoi and Ho Chi Minh city. Explaining the sharp drop in the supply, Mr. Dinh said that the number of approved real estate projects is decreasing, while ongoing projects are facing difficulties due to legal and financial constraints.
“Although the government, ministries, and sectors have made efforts to overcome difficulties and achieved some remarkable results, the cash flow pressure still persists for real estate businesses. In the short term, the prices of apartments in the city centers will continue to rise, especially in the affordable and mid-range segments. Meanwhile, the resale prices of high-end luxury projects may experience a slight decrease,” said Mr. Dinh.
Accelerating social housing investment
According to experts, to improve the price landscape of apartments, the first necessary factor is to increase the supply in the market. In this regard, the development of affordable social housing will significantly contribute to a sharp reduction in the average price of apartment units.
In response to the irrational product structure, since the beginning of the year, the Prime Minister has instructed the Ministry of Construction to guide enterprises in restructuring and lowering prices of housing segments, providing appropriate and timely solutions to the real needs of social housing, worker housing, and low-income people.
According to the report from the Ministry of Construction, this year Hanoi has registered the completion of 3 projects with nearly 1,200 social housing units, while Ho Chi Minh city has registered the completion of 6 projects with a scale of nearly 3,800 units. According to the Project to Complete 1 Million Social Housing Units by 2030 approved by the Prime Minister, Hanoi’s target is 18,700 units and Ho Chi Minh city’s target is over 26,000 units.
Mr. Hoang Hai, Director of the Housing Management and Real Estate Market Department at the Ministry of Construction, said that after implementing a preferential credit package worth 120,000 billion VND (5.2 billion USD), 27 provinces have announced the list of 63 social housing projects eligible for loans under this program, with a capital demand of 28 trillion VND. “Some projects in localities have already disbursed this credit package. If projects that have been approved and received investment approval are completed on schedule, we will basically achieve the target of having 428,000 social housing units by 2025. In the coming time, the Ministry of Construction will coordinate more closely to accelerate the progress of investment in social housing projects and ensure timely credit to disburse the preferential package,” Mr. Hai said.
