Challenges remain

Challenges continue to be recognized

The fourth quarter of 2023 is the time when the housing market in Hanoi recorded the lowest number of new supply in the past 10 years, in both the low-rise and apartment segments.

For the apartment segment, Savills Vietnam's market report shows that in Q4 2023, supply increased by 52% QoQ but decreased by 1% YoY to 2,876 units. Primary supply reached 11,911 units, down 40% QoQ and 41% YoY. However, new supply recorded in the quarter only reached 10,403 units, Class B accounted for 84% of supply. For the low-rise segment, in 2023, total new supply reached 272 units, down 82% YoY. New supply had 87 units, including 58 units from the new Solasta Mansion project in Ha Dong and 29 units from the existing An Lac Green Symphony project in Hoai Duc. Primary supply reached 710 units from 16 projects, down 2% QoQ and 23% YoY. Townhouses are the main product with a market share of 44%.

The common price range of both segments remains high. Of which, apartments priced from VND51-70 million/m2 account for 63% of new supply, up 24% year-on-year. Apartments in this price range account for 49% of units sold, up 21% year-on-year. Apartments priced above VND4 billion account for 42% of units sold in 2023, up from 3% in 2019. Apartments priced from VND2 to VND4 billion account for 55% of the market share. Only 3% of apartments are priced below VND2 billion.

Real Estate - Housing Market Picture in Hanoi: Challenges Still Remain — Due to limited supply, average primary selling prices across the market continue to increase (Photo: Social Network)

In addition, although most developers did not change prices, the high-priced low-rise inventory increased primary prices. For example, primary villa prices increased 55% quarter-on-quarter to VND160 million/m2 of land, mainly due to low-priced supply in Me Linh sold in Q3/2023. Townhouse prices increased 3% quarter-on-quarter to VND194 million/m2 of land. Shophouse prices also increased 3% quarter-on-quarter to VND328 million/m2 of land.

According to Ms. Do Thu Hang, Senior Director, Research & Consulting, Savills Hanoi: “The housing segment continues to grow in price due to increased land and construction costs, developed infrastructure and improved quality. The limited supply in the market continues, leading to the average primary selling price in the whole market continuing to increase”.

The number of apartments sold in Q4 2023 reached 3,045, up 45% QoQ and 5% YoY. New supply had an absorption rate of 46%. Meanwhile, the low-rise segment had the lowest transaction volume in many years. The number of transactions in Q4 2023 decreased by 37% QoQ and 67% YoY. The absorption rate in the quarter was only 9%, down 5 ppts QoQ and 12 ppts YoY. In 2023, only 359 units were sold, the lowest since 2014. Total low-rise transactions decreased by 76% YoY and the absorption rate in 2023 was only 36%, down 31 ppts YoY.

Faced with the low absorption rate, Ms. Hang analyzed: “There are still concerns among buyers. In fact, the number of apartments sold in the 2023 quarter is mainly projects where the investor is reputable, legally guaranteed, and has fulfilled financial obligations. Therefore, despite support in terms of bank loan interest rates for real housing needs, buyers have certain concerns about legal factors. Moreover, banks are also concerned about the fact that the investor has not fulfilled legal obligations with the project to complete the loan procedures. This invisibly affects the decision of buyers and the number of houses sold, and explains the fact that although loan interest rates have decreased, the absorption rate is still not high.”

What opportunities are there for home buyers with real housing needs?

According to Ms. Hang, in the context of limited supply and high primary prices, the opportunity for those with real housing needs may lie in the secondary market. The secondary market has the advantage of being able to buy with many options, suitable for affordability and more secure legality. For example, the price of secondary villas per square meter of land is 7% lower than the average primary price, secondary townhouses are 24% lower than primary products and secondary commercial townhouses are 40% lower than primary products on the market.

Real estate - Housing market picture in Hanoi: Challenges remain (Figure 2). — Ms. Do Thu Hang, Senior Director, Research & Consulting, Savills Hanoi

At the same time, homebuyers can expect new supply from developing infrastructure. Infrastructure investment projects such as Ring Road 3, 5 and 4 will expand the Hanoi housing market, aiming to de-concentrate demand in inner-city and central areas. Developing infrastructure will promote housing demand to neighboring provinces and areas with reasonable prices and larger land funds.

Savills' report also said that this is a positive point for the supply, as housing products in non-central areas and neighboring provinces will increasingly help meet Hanoi's housing needs. Accordingly, in 2024, the market will welcome an additional 12,100 new apartments, with 87% of the market share located in Hoang Mai, Nam Tu Liem and Ha Dong districts. Hung Yen and Bac Ninh will supply about 203,000 apartments from 2024 to 2026. By 2026, the low-rise segment is expected to have 14,000 new apartments from 37 projects. Large projects such as Vinhomes Co Loa or Vinhomes Wonder Park will provide new low-rise supply to the market.

In addition, the passing of the Housing Law, the Real Estate Business Law and most recently the Land Law is expected to have a positive impact on the market. “The regulation that investors must fulfill their financial obligations before future products are formed is one of the contents that strengthens buyers' confidence. Therefore, it can be believed that in 2024 - 2025 and the following period, market confidence will be further strengthened, products will be provided by reputable investors with real financial capacity, thereby the market will be more balanced and diverse in products,” said Ms. Hang.

NAM ANH

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