Hanoi Apartments: Skyrocketing Prices

The prolonged scarcity of supply is causing Hanoi apartment prices to soar unusually high. In fact, some suburban areas are experiencing an "exaggerated" situation with prices reaching 60-70 million VND/m2. Meanwhile, social housing projects are being implemented at a slow pace, making the dream of owning a home increasingly distant for many people.


Everywhere is increasing in price

Before Tet Nguyen Dan, Ms. Ngoc Thanh posted an advertisement for a 66m2 apartment with two bedrooms in the Nguyen Xien Street project, Thanh Tri district, for 2.7 billion VND but there were no interested buyers.

However, after Tet, Ms. Thanh was surprised when the neighboring apartment was sold for 3.3 billion VND so she decided to sell hers as well. “Just after one week, a buyer came and deposited immediately with a price increase of 600 million VND. I bought this apartment in 2016 for 1.8 billion VND. Now, I am selling it for more than 80% of the original price,” said Ms. Thanh

Hanoi apartments have soared in price due to scarce supply. Photo: Nhu Y

Ms. Thu Huyen planned to sell her 100m2 apartment in the Diplomatic Corps urban area (Bac Tu Liem). Real estate agents quoted prices of up to 68 million VND/m2, while she bought it for 43 million VND/m2 three years ago. “I believe the price will continue to rise so I’m waiting for it to increase before selling,” said Ms. Huyen.

The price shock of apartments has spread to suburban projects. Even though these areas are dozens of kilometers away from the center of Hanoi, the apartment prices have been recorded at 60-70 million VND/m2.

“Currently, land use and construction costs are much higher than before, so it’s also difficult for commercial project investors to offer primary apartment prices in Hanoi below 30-40 million VND/m2. In addition, there may be some units with the advantage of owning large land funds, having new projects that push prices and create strong fluctuations in the market.”

Mr. Pham Duc Toan – CEO of EZ Property

The newly started Lumi Hanoi project (Tay Mo ward, Nam Tu Liem district) currently has a deposit price of about 66 million VND/m2 advertised by brokerage companies. Including taxes, the price of an apartment here can reach 72 million VND/m2. With this price, an apartment meeting basic requirements with 2 bedrooms and an area of about 74m2 is priced at up to 5.3 billion VND.

Also in Tay Mo ward, the sale prices of apartments in the Masteri West Heights project are publicly listed by trading floors from 3.6 billion VND (59m2 apartment) to 3.9 billion VND (62m2 apartment), or about 61 – 62 million VND/m2.

Severe shortage of social housing for many years. Photo: Nhu Y

Mr. Pham Duc Toan, CEO of EZ Property, said that both primary (from developers) and secondary (from resale) apartment prices in Hanoi have increased significantly since last year. Mr. Toan evaluates that the price level of apartments in Hanoi will be difficult to decrease due to the high actual housing needs of people, while the supply of new apartments is very limited due to many projects facing legal difficulties.

Lack of social housing

According to real estate experts, the “skyrocketing” of apartment prices in Hanoi is due to the prolonged shortage of housing supply in the market. There are very few new projects being launched while the demand for residential apartments is very high. Even the social housing segment (considered a lifeline for the market to reduce apartment prices) has been slow to develop.

At the Spring Real Estate Forum on March 15, Mr. Le Viet Hai, Chairman of Hoa Binh Construction Group, said that in 2021, the government issued a resolution to promote the development of social housing, but in 2021 – 2022, there were no transactions.

“I believe the core issue lies in the advantages of social housing such as project approval, design approval, target buyers, project scale, and pricing, which are still very complicated. About 2 years ago, we worked with a social housing investor and the project had an investment license, but at the beginning of this year, we just completed the procedures for construction of social housing to be able to implement it,” Mr. Hai said.

According to Mr. Hai, the root problem lies in the government’s preferential policies on land use tax, value-added tax (VAT), credit, and management costs that are not suitable for market laws, so investors are not enthusiastic.

The slow implementation of social housing was pointed out by the Ministry of Construction to be caused by the fact that the policies on social housing development have not been timely revised, resulting in many limitations such as lack of land funds, limited credit sources, and prolonged implementation time. Although amended laws such as the Housing Law and Real Estate Business Law have been passed, they will not be implemented until early 2025. Therefore, the incentives for developers and simplification of procedures have not been applied yet.

Renting is a better option

To solve the housing problem for the people, many experts believe that the rental model should be considered instead of social housing purchase. Mr. Nguyen Manh Ha, Deputy Permanent Chairman of the Real Estate Association, said: “Social housing should be built for rent instead of sale due to the significant income disparity. In many developed countries, including prominent ones like Germany, rental housing is the main type of housing in the country,” said Mr. Ha.

Mr. Ha suggested increasing the proportion of rental social housing to 30-40%. The state should encourage businesses and individuals to invest in rental housing.

Agreeing with this view, economist Vu Dinh Anh said that the social housing program should focus on renting instead of selling.

“On average, low-income people who buy social apartments borrow 500 million VND with preferential loan packages, which means they have to pay 11 million VND a month for both principal and interest of the loan. If they don’t have enough income, where can they find money to pay the house rent?” Mr. Anh said. He added that social housing should be the opposite of a project for 80% rental and 20% selling.

Deputy Minister of Construction Nguyen Van Sinh said that compared to the target of building one million social housing units by 2025, Hanoi has only developed 1,700 units, accounting for 9% of the target, while Ho Chi Minh City has reached 19% with nearly 5,000 units. These localities have also registered to complete social housing in 2024 at a low level: Hanoi (nearly 1,200 units), Ho Chi Minh City (nearly 3,800 units).

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