Prices continue to "anchor" at high levels

According to Savills Vietnam's 2023 First Half Market Report, in the apartment market, new supply increased by 76% quarter-on-quarter and 125% year-on-year to 3,596 units. Of which, the primary market welcomed 20,412 units, up 5% quarter-on-quarter and 14% year-on-year.

In contrast, the villa and townhouse market had no new projects in the quarter, with all new supply coming from 126 units from existing projects, up 334% QoQ but down -14% YoY. Primary supply consisted of 797 units from 14 projects, up 5% QoQ but down -20% YoY.

As of the second quarter of 2023, the average primary selling price of apartments in the Hanoi market reached VND53 million/ ^m2 , up 1% quarter-on-quarter and 17% year-on-year. This price has increased for 18 consecutive quarters and is 73% higher than in the first quarter of 2019. Ms. Do Thu Hang, Senior Director, Consulting and Research Department, Savills Hanoi commented: Due to the high land prices and construction costs. In addition, the need to invest in improving the quality of products and surrounding infrastructure and utilities, internal projects also lead to primary market prices, or prices of newly launched projects, always being higher than the general market level of apartments for sale.

Ms. Hoang Thanh Nhan, in Cau Giay district, said: My family wants to buy an apartment for our children to live separately, but the price in the inner city is too high while the price of projects in the suburbs is still high. We have consulted 6-7 projects but still have not decided, because if we buy, we have to borrow more money from the bank, while our income is not high, the pressure of paying interest is the biggest concern right now.

Meanwhile, for villas and townhouses, prices in the second quarter of 2023 compared to the previous quarter have been adjusted downwards for some villa or townhouse products. Townhouse products have not recorded any price reduction. Specifically, the primary price of villas decreased by 10% quarter-on-quarter to VND 100 million/ ^m2 of unsold land in Me Linh district along with additional primary supply, causing oversupply while customer demand has not really increased. Shophouse prices decreased by 7% quarter-on-quarter. In contrast, townhouse prices recorded an increase of 4% quarter-on-quarter, reaching VND 173 million/ ^m2 .

Commenting on the mixed developments in the prices of low-rise products and apartments, Ms. Do Thu Hang added: “It should be noted that the price reduction of the villa and townhouse market is due to projects far from the center being launched at reasonable prices, causing the market level to decrease. In fact, the price of the low-rise segment is still high, especially in areas adjacent to Ring Road 2 and Ring Road 3 of Hanoi and developed areas with plans for social infrastructure, stable traffic infrastructure, and areas with high population density.”

Income growth remains “extended” with price growth

Long-term housing demand remains high due to positive net migration, population growth and high urbanisation rates. In addition, it is forecast that Hanoi will have 157,000 additional households between 2023 and 2025. However, future supply will only include 59,000 apartments of all grades, 9,000 low-rise houses and 18,700 social houses expected to be launched for sale. There is a shortage of 70,300 houses.

Faced with the high demand for housing, the question is whether the average income of people can afford to own a house in Hanoi. Savills Vietnam's report also pointed out that Hanoi is striving to have an average income per capita of 150 million VND/person/year in 2023. Compared to 2019, the average income growth rate is 6%/year. Meanwhile, the growth rate of apartment prices from 2019 to the first half of 2023 is 13%/year.

Ms. Hang commented: “It is clear that the reality is that the growth of per capita income in Hanoi is lower than the growth of apartment prices. This is an example to show that people will take longer to own a house if this gap continues to widen. If these two numbers do not move closer together, it will make it longer and more difficult for people in general, those living in Hanoi and those from other provinces who want to own a house in Hanoi for work or for their children. Not to mention low-rise housing products, when the price is high, buyers will also consider the reasonableness of the price as well as consider whether it is suitable for the real value of the product or not. From here, the decision-making process of buyers will be slower and longer.”

However, in the villa and townhouse market, products with reasonable prices and well-planned projects still attract buyers. This is reflected in the fact that transactions in the low-rise segment in Hanoi have improved after a gloomy first quarter, with 106 units sold, up 20% quarter-on-quarter.

“This is one of the positive signs recorded at the end of the second quarter of 2023, when the market had low-rise projects with products offered at prices of about 10 billion VND/unit. According to records in the second quarter of 2023 in Hanoi, projects with primary prices under 10 billion VND accounted for 39% of transactions, apartments from 10 to 20 billion VND accounted for 28% and apartments over 30 billion VND accounted for only 13%. The data shows that the more reasonable the price of the product, the better the sales rate,” Ms. Hang commented.

Mr. Dinh Van Troi, Sales Director of Dai Phong Construction Investment - Real Estate Joint Stock Company, said: The primary supply is limited, but the advantage for home buyers in the Hanoi market today is that they can choose the secondary market - with many products that have been developed in advance, are legally guaranteed and have more reasonable prices.

In the current conditions, the prices of the secondary market are still competitive compared to the primary market. Typically, low-rise products, according to Savills Vietnam, in the second quarter of 2023, the secondary supply has a price 20% lower than primary units. The primary market does not have many choices while the secondary market has more choices in terms of price, although the products are no longer new, in return, buyers can be ready to put into use or can use immediately.

In particular, recently, Hanoi has promoted the disbursement of public investment. This is a favorable factor to promote Hanoi's economic activities in general and other activities including real estate business in particular. With the construction of Ring Road 4 just started, it is expected to promote development in suburban areas such as Me Linh, Dan Phuong, Hoai Duc, Soc Son, Ha Dong, Thanh Oai... when Ring Road 4 is opened to traffic in 2027, the housing supply in areas around Ring Road 4 is forecasted to increase compared to present.