Ho Chi Minh City: New Supply Continues to Dwindle
According to Savills Vietnam, in the first quarter of 2024, the primary supply of apartments in Ho Chi Minh City continued to decline sharply by 35% quarter-on-quarter and 28% year-on-year to 4,922 units. This is due to 9 projects temporarily suspending sales due to incomplete legal requirements or adjustments to sales policies. Two projects have postponed their launch plans, resulting in a meager new supply of 633 units from one new project and six subsequent phases. Most of the primary supply (82%) was concentrated in Districts 9, Binh Tan, and Binh Chanh.
Along with the decrease in supply, apartment sales in Ho Chi Minh City also slowed down in the first quarter of 2024. The reason is that sales activities were interrupted by the Tet holiday and many investors took time to refine their strategies. Sales volume comprised 1,116 units, down 63% quarter-on-quarter but up 29% year-on-year. Class C products were favored by buyers and accounted for 61% of the quarterly sales volume, followed by Class B with 37%. New supply performed well and was absorbed by 68%; while the absorption rate of existing inventory was low at 16%.
Apartment supply in Ho Chi Minh City continues to dwindle.
According to Savills, the townhouse and villa segment saw only 42 new units launched, up 56% quarter-on-quarter but down 11% year-on-year. This supply came from a single project launched, Dong Tang Long – Hung Gia, with prices ranging around 10 billion VND per unit.
The limited supply has persisted for three years, mainly due to regulatory barriers, resulting in a shortage of new projects. The current total primary supply in the Ho Chi Minh City market is 762 units.
Townhouses and villas priced above 30 billion VND accounted for 76% of the market share. Notably, 85% of the primary supply is located in Thu Duc City. New products with low prices and significant discounts offered by developers to boost sales have led to a 13% quarter-on-quarter decrease in the average primary selling price.
Due to the challenging market conditions, most investors have introduced two-year extended payment schedules along with principal and interest grace periods. Simultaneously, commercial banks are currently offering attractive interest rates to stimulate consumer spending. Therefore, the market anticipates that reduced home loan interest rates will boost housing demand and increase transaction volume when future projects are launched.
Losing Ground to Binh Duong, Dong Nai, and Long An, but Qualified Supply Remains Scarce
According to Savills’ estimates and research models, Ho Chi Minh City requires approximately 50,000 apartments to meet the city’s housing needs, with 60-70% of that total supply coming from the budget housing segment.
Ms. Giang Huynh believes that the current and future supply in Ho Chi Minh City cannot meet this demand.
However, when looking at neighboring markets such as Binh Duong, Dong Nai, and Long An, the total supply from these three markets combined cannot meet the existing demand in Ho Chi Minh City. This is a result of the prolonged imbalance between supply and demand over many years.
In the neighboring areas, the supply of affordable housing (priced below 30 million VND/m2) is also increasingly scarce. In Binh Duong, although a number of projects have been launched recently, the number of projects that are eligible to open for sale this year is relatively small. Accordingly, some projects with reasonable prices ranging from 30-35 million VND/m2, convenient locations, and clear legal status have attracted buyer interest.
For example, in Di An, Binh Duong, Phu Dong SkyOne project by Phu Dong Group is being introduced to the market with prices ranging from 1.4 -1.8 billion VND per unit and is scheduled to be offered for sale in the second quarter of this year. Due to its affordable prices, which align with the budgets of many people, especially first-time homebuyers, this project has gained attention. It is reported that the construction progress of Phu Dong SkyOne is still being accelerated every day. The project is currently constructing the first steel floor slabs and has completed 100% of the D400 pile driving.
Affordable apartment projects in Ho Chi Minh City’s neighboring areas are drawing attention as they align with the needs of the majority, especially young families.
According to Ms. Giang Huynh, in the Binh Duong apartment market, projects are being developed targeting both residential and investment buyers from Ho Chi Minh City. The selling prices of 2-bedroom apartments here are currently around 2 billion VND per unit, making them suitable for small families.
“If we exclude the periods of late 2023 and early 2024, newly launched projects have been absorbed within 3-4 quarters. For neighboring areas, when infrastructure is improved and travel time is reduced, and when the market is unlocked in terms of land, developers can fully develop affordable housing products. In this process, government support in terms of legal frameworks and infrastructure is crucial,” added Ms. Giang.
The Prime Minister has directed the authorities to urgently propose to the National Assembly to move the implementation date of the new Land Law from January 1, 2025, to July 1, 2024. The three major changes include: land use fees will be based on market prices; compensation and land clearance regulations will be established; and Vietnamese people residing abroad will be allowed to purchase real estate in Vietnam with ownership rights similar to those of domestic citizens.
In the first quarter of the year, Ho Chi Minh City has been rapidly disbursing funds for key projects, representing a 25% annual increase. Notable projects are the Ring Road 3, Metro Line 1, and An Phu intersection. The eastern area of Ho Chi Minh City is being boosted by a wave of investments and strong infrastructure development.
Therefore, Savills experts believe that real estate in satellite provinces such as Dong Nai and Binh Duong will also benefit from improved infrastructure and become direct competitors to Ho Chi Minh City, with prices 79% lower and a larger primary supply.
