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Apartment hikes hint at speculation return
Apartments in Hanoi are reaching record-high selling prices due to supply and demand differences and low interest rates, which some experts say is distorting the market.
Nguyen Kim Dung, an executive at a foreign-invested company, was surprised to see the price of apartments going up recently. “I spent VND3 billion ($125,000) for an apartment in January, and someone has just asked VND3.4 billion ($141,600) for it. I can earn 10 per cent within only two months,” she said.
In addition to raising the prices of new projects, old ones are going up, too. Tran Hoang Hai, a teacher at a university in Long Bien district, looking for an apartment for her parents nearby, is shocked by the current prices.
“My apartment cost around VND1.3 billion ($54,000) five years ago, but now all the housing here and in surrounding buildings are more than VND2.2 billion ($92,000),” Hai said.
According to CBRE Vietnam, a commercial real estate brokerage, last year prices of most projects increased sharply by 10-45 per cent on-year. And in 2024, apartment prices will likely increase by 16-24 per cent on-year.
With price rises maintaining at double digits, the Hanoi apartment market has witnessed the strongest price hike over the past five years. Previously, the average price climb in Hanoi apartments was very low at 2–3 per cent annually.
A senior expert from CBRE Vietnam’s Professional Services, said that housing supply was scarce now, while demand continued increasing.
“Last year, about 11,000 new units were launched for sale on the market. This was a minimal number, equalling 20-25 per cent compared to previous years. 2023 was also the fifth consecutive year that the Hanoi property market reported a decrease in supply, and the total number of new supplies was the lowest level over the past decade,” the expert said.
Meanwhile, demand in the market is huge due to Hanoi’s population growth and urbanisation rate. “This is the time for a boom of strong demand,” she added.
However, according to experts the key reason has been the low interest rates, which have been maintained for more than a year. A large amount of money that was deposited in banks for 1-2 year terms to enjoy high interest rates has reached maturity. That’s why they have decided to withdraw their savings to put money into real estate, including the apartment segment.
In the past, apartments were not an attractive segment for investors because the profit from subleasing each year was only about 5 per cent. However, the recent situation has changed with apartments, and investors can earn annual profits of 16 per cent at least, in addition to the cash flow from rental. So the efficiency of investing in housing is excellent, much better than depositing money in the bank.
Nguyen Quoc Anh, deputy director at batdongsan.com.vn, said that the prices would surge going forward, especially for the commercial housing segment.
“For commercial housing projects, developers must be proactive in compensating for site clearance at market prices. This also increases project investment costs, causing the high selling prices,” Anh said. “If housing prices continue to surge for a long time, it will ‘distort’ the property market, hindering middle- and low-income people from buying a house or an apartment.”
However, Hanoi Land Registration Office has yet to see any big surge in recent months. Even the number of applications submitted after the Lunar New Year decreased by half compared to the end of last year. Specifically, the office received more than 22,000 applications last November, and the quantity exceeded 10,000 applications in February.
“The number of registration applications has increased in the past two months, but there is no sudden change compared to the end of 2023. In the early months of the year, people’s psychology is not likely to buy real estate, so the annual number of deals and registrations often dips,” said Pham Hoai Nam, director of the Registration Office for Gia Lam district.
At the end of 2023, there were about 27,500 apartments in inventory in Hanoi, mainly middle and high-end segments (accounting for 85 per cent), and primary apartments (9 per cent). Thus, there is no shortage of supply in Hanoi, but only a shortage of affordable housing.
“However, some investors and real estate companies have provided market forecasts that lack transparency and conviction, pushing prices up to an incorrect value. People with a crowd mentality think that land prices will continue rising, so they are looking for houses right now. Homeowners and landowners have followed the rumours and raised selling prices unreasonably,” real estate broker Tran Tuan Binh told VIR.
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