While an increase in prices is usually accompanied by a surge in demand, a peculiar phenomenon is currently taking place in Ho Chi Minh City’s real estate market. Despite a significant rise in secondary prices across numerous older apartment projects, there has been a noticeable stagnation in market activity.
Veteran real estate agent, Mr. Tuan, has observed that resale prices for apartments in the city have surged by 50%, with some projects even doubling their initial offering prices from the developers. However, in the past two months, there has been a notable absence of buyers for these older apartments.
“Previously, my team and I would handle 10 to over 20 transactions per month. But since the beginning of April until early May, the number of transactions has significantly dropped to just 5 to 8 per month, reflecting a 70 to 80% decline,” shared Mr. Mai Anh Tuan, a real estate agent.
Ho Chi Minh City’s secondary apartment prices surged by 15-30% in April compared to the previous year.
According to real estate agents, the demand for both owner-occupied and rental properties remains robust. However, buyers are hesitant to commit to purchasing these older apartments due to the steep prices. Properties priced above VND 5 billion are even more challenging to liquidate as buyers tend to compare them with primary offerings, which offer more attractive payment terms.
“In May, clients entrusted me with their properties, but the secondary apartment prices are currently on the rise. Investors also compare the secondary market prices with those offered by developers for primary projects. Investing in primary projects allows for more flexible payment terms, which appeals to investors,” explained Ms. Tran Thi Thien Nga, a real estate agent.
A review of resale prices in Ho Chi Minh City’s older apartment complexes, some of which have been operational since 2017, reveals a significant surge. Initially, the developer’s asking prices ranged from VND 50-60 million per square meter, but the secondary market prices have now soared to over VND 100 million per square meter, effectively doubling the original prices.
Data from online real estate platforms indicates that Ho Chi Minh City’s secondary apartment prices climbed by 15-30% in April compared to the previous year, primarily in the mid-range and luxury segments. Consequently, transaction volumes have plummeted. Experts attribute this to the fact that secondary apartment buyers are predominantly end-users with limited financial resources. The exorbitant prices have made these properties unaffordable, and they are also unattractive to investors as prices have already peaked.
“For apartment projects, investors typically prefer to enter during the pre-sale stage to benefit from the payment schedule and the project’s development progress. They tend to exit as the project nears completion,” explained Mr. Le Quoc Kien, an independent real estate consultant. “When it comes to already completed apartments, investors are reluctant to purchase them as they no longer offer the same profit potential as during the construction phase.”
Market analysts predict that the considerable gap between property prices and buyers’ purchasing power will lead to increased buyer caution when it comes to high-value assets. However, the market will eventually revert to the law of supply and demand. Apartments with inflated prices will witness a correction as actual buying power will reflect the true value of these properties. Additionally, the high prices in certain areas will encourage a shift in demand to neighboring locations offering more affordable options.
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