Apartment prices skyrocket, Hanoians' incomes can't keep up
According to a report by Savills Vietnam, the second quarter of 2023 is the 18th consecutive quarter that apartment prices in Hanoi have increased. Currently, the average selling price of primary apartments in Hanoi is 53 million VND/m2, an increase of 73% compared to 4 years ago (2019).
Ms. Do Thu Hang, Senior Director of Savills Hanoi Consulting Department, explained: The continuous increase in primary apartment prices in Hanoi is due to the high increase in land prices and construction costs.
Apartment prices are skyrocketing, while Hanoians' incomes are falling behind. (Photo: TTX)
In addition, the need to invest in improving the quality of products and surrounding infrastructure and utilities, and 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.
According to Savills research, the demand for housing in Hanoi continues to increase every year, due to the steady increase in migration. In addition, it is forecasted that from 2023 to 2025, Hanoi will have 157,000 more households.
However, the supply of apartments is very low, with only 59,000 apartments of all types, 9,000 low-rise houses and 18,700 social houses expected to be opened for sale in the future. There is a shortage of 70,300 houses.
Savills' report shows that Hanoi is striving to have an average income per capita of VND150 million/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 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 have to own a house longer if this gap continues to widen.
“If these two numbers do not move closer together, it will make home ownership for people in general, those living in Hanoi and those from other provinces who want to have a house in Hanoi for work or for their children longer and more difficult,” said Ms. Hang.
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 buyer's decision making will be slower and longer.
Rare segment discounted, but not for the masses
In contrast to the apartment segment, the villa and townhouse segment is adjusting slightly downward. Specifically, the primary price of villas decreased by 10% quarter-on-quarter to VND100 million/m2 of unsold land in Me Linh. Shophouse prices decreased by 7% quarter-on-quarter. In contrast, townhouse prices recorded a 4% increase quarter-on-quarter, reaching VND173 million/m2. Although decreasing, this is not a segment for the majority due to its high price.
Ms. Hang said that the price reduction of villas and townhouses is due to projects far from the center being launched at reasonable prices, causing the market level to also decrease.
In reality, the price of low-rise segment is still high, especially in areas adjacent to Hanoi's Ring Road 2 and Ring Road 3 and developed areas with stable social infrastructure and traffic infrastructure planning, and areas with high population density.
Villas are a rare segment that has reduced prices, but they are not for the majority. (Photo: DP)
According to Ms. Hang, in the market for villas and townhouses, 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,” said Ms. Hang.
According to the records of 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.
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 price of the secondary market is still competitive compared to the primary market.
Typically, low-rise products, according to Savills 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 product is no longer new, in return, buyers can be ready to 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 recently started construction of Ring Road 4, it is expected to boost development in suburban areas such as Me Linh, Dan Phuong, Hoai Duc, Soc Son, Ha Dong, Thanh Oai and Thanh Tri when Ring Road 4 is opened to traffic in 2027. Housing supply in areas around Ring Road 4 is forecast to increase by 36% compared to the present.
Once the infrastructure is developed synchronously, it will support the balanced supply of demand in all areas. With convenient transportation, people in need will be willing to move to areas with more reasonable prices.
“This is considered one of the factors that solves the problem that recently, the inner city area or the area near Ring Road 3 of the Hanoi market has established new high price levels, causing obstacles for people to access home buying,” Ms. Hang commented.
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