Apartment prices steadily increase
The rapid economic development and urbanization have led to a sharp increase in housing demand while land funds are gradually depleted, housing supply is continuously decreasing due to slow project implementation due to policies related to capital sources and decisions of agencies and departments in controlling the real estate market. Combined with the increased value of urban land when infrastructure and public services are upgraded, apartment prices have continuously set new levels in recent years.
- In Hanoi, apartment prices have been continuously increasing in both primary and secondary markets.
Research data from the Vietnam Association of Realtors (VARS) shows that the apartment price index in Hanoi in 2023 increased by about 38 percentage points compared to 2019. In Ho Chi Minh City, it was 16 percentage points.
In particular, the apartment price index is one of the indexes in the Real Estate Price Index Project that VARS is researching to reflect the fluctuations of real estate prices under the influence of market movements over time.
Specifically, apartment prices in Hanoi have been continuously increasing in both the primary and secondary markets. Meanwhile, apartment prices in Ho Chi Minh City have also begun to enter a cycle of price increases again, along with a gradual decline in high-end and luxury projects in the secondary market.
The strong increase in demand for housing is not only due to the housing demand from the shift of urban households, the continuous increase in the labor force and students flocking to cities to work and study, especially in Hanoi. It is also contributed by a large amount of increasing investment demand as the rental price of old and new apartments in residential areas has continuously increased since the end of the social distancing period, especially in the context of the market recovery.
Statistics from Batdongsan.com.vn show that the level of interest in apartments for sale nationwide in January 2024 increased by 66% compared to the same period in 2023, the number of real estate listings also increased by 46%. Specifically, the number of searches for apartments in January 2024 in Hanoi increased by 71% compared to the same period. Similarly, in Ho Chi Minh City, the demand for apartments also increased by 59%. This trend is similar in most other provinces and cities.
Despite the strong increase in homebuyer demand, apartment supply is still growing disproportionately. Apartment supply in 2023 recorded a decrease in both Hanoi and Ho Chi Minh City markets.
In Hanoi, the supply of new apartments in 2023 is estimated at 10,500 units, down about 31% compared to the previous year. In Ho Chi Minh City, the supply of new apartments is estimated at nearly 7,500 units, down more than 50% compared to the same period in 2022.
The supply of apartments has decreased recently due to the increasingly scarce number of newly approved real estate projects while ongoing projects are "struggling" due to legal and capital problems. Although the efforts of the Government, ministries and branches to overcome difficulties have achieved some remarkable results, the number of projects implemented and restarted in 2023 has increased sharply, but the cash flow pressure has not yet eased for real estate businesses.
Expectations that social housing will increase, apartment prices will decrease
Accordingly, the situation of capital mobilization through corporate bond issuance has gradually improved since mid-2023 thanks to the efforts of State management agencies.
However, the pressure of bond maturity remains a challenge for businesses in 2024, especially real estate businesses, with nearly VND115.7 trillion of real estate corporate bonds maturing, accounting for 41.4% of the total value of corporate bonds due this year, according to the latest data from the Vietnam Bond Market Association (VBMA).
- In the affordable and mid-range segments, apartment prices will continue to increase, especially in big cities.
Issuance activities in the first months of 2024 have also begun to face barriers due to more difficult conditions for bond issuance and trading such as regulations on professional securities investors and mandatory credit rating regulations when Decree 65/2022/ND-CP is re-implemented from the beginning of 2024 after a period of extension and postponement according to Decree 08/2023/ND-CP. However, this is only a short-term difficulty; in the long term, the implementation of Decree 65 will help the corporate bond market develop more healthily.
Regarding credit capital, outstanding credit for real estate business activities has continuously increased thanks to solutions from the banking sector, the Government and relevant agencies in removing difficulties for projects.
However, consumer credit and real estate loans in the first months of 2024 continued to decline from 2023, although lending interest rates remained low. Because inflation and interest rate fluctuations are still unpredictable, borrowing money to buy a house and paying monthly debts of over 10 million VND has become a burden for many families, when they are not really confident in their future job and income situation.
However, after Tet, home purchase credit increased slightly at some commercial banks with diverse real estate ecosystems, as people began to invest again.
After a long period of decline, the supply of apartments in both special urban areas is also expected to increase again thanks to the recovery of the market and efforts to remove legal obstacles for projects by State management agencies. Especially the supply of social housing and workers' housing. However, this supply needs time to complete legal procedures before being officially launched on the market and mainly comes from areas far from the center.
Therefore, VARS forecasts that in the short term, apartment prices in the center of major cities will continue to increase, especially in the affordable and mid-range segments. Meanwhile, the purchase and resale prices of high-end and luxury projects may record a slight decrease.
VARS expects that, along with the foundation of a series of positive factors of the current market, by mid-2025, when the new Laws related to the real estate sector are passed with new regulations towards removing difficulties for investors and buyers of social housing and housing for workers officially come into effect. The supply of social housing will increase, the apartment price level will drop to a level more suitable for people with real housing needs.
Ngan Giang
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