Sky-high apartment prices in Hanoi: Risk of a 'bubble'?

Apartments in Hanoi have continuously set new price levels in recent years. As of the first quarter of 2024, the average price reached 59 million VND/m2, an increase of 21 consecutive quarters.

According to Dr. Le Xuan Nghia, member of the National Monetary Policy Advisory Council, the Hanoi apartment market is experiencing an imbalance in supply and demand, which is at risk of causing a "bubble" phenomenon.

Citing the fact that many projects in Hanoi have recorded strong growth, with some projects increasing by more than 30%, with prices reaching over VND100 million/m2, Mr. Nghia said that this is an issue that needs to be warned about, otherwise the apartment segment will sooner or later become uncontrollable.

“ I have warned that the apartment segment is starting to show signs of a “bubble” and it may turn out to be true. One day, when supply is no longer available but demand continues to increase, the supply and demand curves will run parallel and will not meet. There is even a situation where someone has a house and can sell it, but they think the price will go up further, so they hoard it and do not sell it, while demand continues to increase, ” said Mr. Nghia.

Recently, apartment prices in Hanoi have continuously increased sharply. (Illustration photo: Minh Duc)

Mr. Vu Cuong Quyet - General Director of Dat Xanh North - also analyzed: In the fourth quarter of 2023, the prices of apartment projects in Hanoi increased by 5-7%. Then, in the first quarter of 2024, apartment prices increased by 6-8%. In the last 2 quarters alone, the apartment market in Hanoi increased by 10-12%.

" This is a strange phenomenon when apartment prices in Hanoi are pushed up to high levels in a declining real estate market ," Mr. Quyet emphasized.

According to Mr. Quyet, the price of apartments increasing too high will exceed the purchasing power of people and attract speculators. After a while, investors and speculators will cut their losses, leading to risks for the market.

A housing "bubble" will form when prices increase too much compared to their real value. This phenomenon originates from a sudden increase in demand for real estate while supply is limited. When seeing an opportunity, speculators rush into the market to make a profit, pushing demand even higher.

Bubbles only stop when they burst. That is when demand declines or stagnates, causing the price of the asset to plummet and the market to collapse.

Sharing the same view, economist, Associate Professor, Dr. Dinh Trong Thinh also commented that the price of apartments in Hanoi has increased rapidly by 30-40% recently, and many investors who are preparing to launch their products also plan to increase the selling price. He warned that this will aggravate the housing crisis that is happening in the market.

Mr. Thinh suggested that the management agency needs to thoroughly remove legal bottlenecks, increase the number of products on the market, and increase competition. “ Social housing and low-cost housing are important solutions to change the current crisis ,” Mr. Thinh said.

According to Ms. Do Thu Hang, Senior Director, Research and Consulting Department, Savills Hanoi, there are small fevers in the apartment segment.

According to Ms. Hang, the supply of apartments continues to be scarce. In the first quarter, the primary supply in the whole market reached 12,928 units, up 9% quarter-on-quarter but down 34% year-on-year. While the supply of apartments has remained low for a long time, on the demand side, in addition to the pent-up demand for buying houses from people for a long time, the market has also received a new amount of demand from investors.

Recently, the Ministry of Construction requested the Hanoi People's Committee to inspect and review real estate business transactions, especially apartments showing signs of unusual price increases.

Thereby, there are measures to rectify and handle acts of price inflation, price manipulation, speculation and violations of real estate business laws (if any).

" The Ministry of Construction requests the Hanoi People's Committee to focus on effectively directing the above content and send a report to the Ministry of Construction before April 20 ," the document stated.

According to the Ministry of Construction, the real estate market has shown signs of improvement. However, recently, the press has reported that in some areas, projects, and apartment buildings, there are apartments and houses with unusually high prices; there are phenomena of price inflation, price manipulation, and speculation.

Chau Anh

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