Recently, apartment prices have increased, but are not proportionate to the value of the apartments, which are the amenities and infrastructure around the project, except for the lack of supply. (Photo: Int)
Price increases not proportionate
From the year 2018 up until now, policies related to the source of the capital along with the decisions of the agencies and departments in the management of the real estate (RE) market have caused the supply of housing real estate to significantly decrease. The demand for housing has continuously increased, putting “pressure” on the supply, pushing RE prices to continuously establish new levels. Particularly for the apartment segment, in Hanoi in the first quarter that just ended.
Research data from the Vietnam Real Estate Brokers Association (VARS) shows that apartment prices in Hanoi have increased for dozens of consecutive quarters. The price index of apartment buildings in Hanoi at the time of the first quarter of 2024 increased by 48% compared to the first quarter of 2019 and increased by 8 percentage points compared to the last quarter of 2023, the highest increase in the past 5 years.
According to a report from Savills, in the first quarter of 2024 alone, the price of primary apartments in Hanoi increased by 3% compared to the previous quarter and increased by 14% compared to the same period last year, setting a record price of up to VND 59 million/m2.
Similarly, according to the latest report from the Ministry of Construction, apartment prices in Hanoi have been recorded continuously on both the primary and secondary markets. Even apartment projects that have been in use from 5 – 10 years, or even old high-rise apartment buildings, have had their prices pushed up quite high. Apartment prices in Hanoi early in 2024 increased by approximately 38% compared to 2019.
Mr. Nguyen Van Dinh, Chairman of VARS, said that the reason for the increase in apartment prices is because the infrastructure has been continuously improved, since the value of RE increases in proportion to the investments. However, it is unreasonable for the value to only increase by 1 but then get multiplied by 3 or 4 times.
In addition, due to the lack of supply, the demand for home ownership is always high and has been increasing. Demand for investment because the huge flow of money is going into real estate to save assets in the context of bank interest rates is “bottoming out”.
Furthermore, it is also due to the demand for apartment investment for rent, which is being driven by the accommodation needs of a large number of international tourists, foreign experts, and students.
In the future, by 2025, Hanoi’s population is expected to reach 9 million people, with the urbanization rate to reach 62%. Thus, by 2025, the population living in urban areas will reach approximately 5,580,000 people, an increase from the level of 4,138,500 people in 2022. This is approximately 120,000 new urban households created each year, so hundreds of thousands of more apartments will be needed.
Hanoi is short 50,000 apartments each year
In reality, real estate experts argue that the price increase of apartments is not proportionate to the value of the apartment, services, and infrastructure utilities. For example, in the area of the western metropolitan of Hanoi, the price of apartments are from 50 to 80 million VND/m2 (depending on each building). Although there is a lot of infrastructure and utilities in the city, when people commute to work in the city center they have to suffer from “tortuous” commutes, always being stuck in traffic jams, dust, and rain… making the prices too high.
Such as some projects in My Dinh, when the investor sold the primary price at around 28-32 million VND/m2, the market price has now increased to 57-60 million VND/m2, while the services, building quality, and surrounding utilities are nothing new.
Or such as the Florence project (Tran Huu Duc street, Nam Tu Liem), an 82m2 apartment was significantly “marked up” since 2020 when the apartment was handed over, and the person who bought the house only had to pay a total of 2.5 billion VND for this apartment. But now the homeowner is “shouting out” a price of 4.7 billion VND/apartment.
At the Goldmark City project (136 Ho Tung Mau), a 104 m2, 3-bedroom apartment, in early 2023, the homeowner listed it for sale at 4.2 billion VND, but by now it has increased to 5-5.2 billion VND.
The demand is real, however with the price increases as they are now, it will be very difficult for the younger generation to “dream” of houses in Hanoi. And in order to buy a house, a family with an income of at least 50 million VND/month will be enough to repay the loan interest with a term of up to 30-35 years.
In addition to demand, speculation by people is also a reason for pushing up house prices in the recent past. Because people with money in their pockets in this period don’t know where to invest, and they see that apartments are a “sweet deal”, so they speculate and buy them to make a profit. And the result is that homebuyers and brokers have pushed up house prices. The subsequent buyers have to pay a higher price than the previous buyers, and like that, in 2-3 months a single apartment can pass through the hands of 3 owners and the price may increase by 30-40%.
The data from the Hanoi Housing Development Plan for the period 2021-2025 also shows that, the total demand for the period 2022-2025 is 185,200 houses, of which 166,600 are apartments.
Meanwhile, the number of new apartments for sale in Hanoi is continuously decreasing. Research data from VARS shows that, in all of 2023, the supply of new apartments only reached approximately 11,000 products, which is 66% compared to the same period in 2022. In the first quarter of 2024 alone, the entire Hanoi market only recorded about 3,000 new apartments for sale.
Thus, from now until 2025, each year Hanoi will be short about 50,000 apartments on average. Meanwhile, the number of new housing projects granted licenses has continuously decreased and “no one wants to sell houses”. The market has also been completely empty of affordable apartments.
