The period of supply scarcity is over, why are house prices still increasing?

According to the Ministry of Construction, the number of completed projects, newly licensed projects, and projects eligible to sell houses "on paper" all increased in the third quarter of 2024. However, when supply is abundant, the market still has reasons for high house prices.

According to the Ministry of Construction, the number of completed projects, newly licensed projects, and projects eligible to sell houses "on paper" all increased in the third quarter of 2024. However, when supply is abundant, the market still has reasons for high house prices.

Recently, the Ministry of Construction announced the real estate market report for the third quarter of 2024. Regarding commercial housing projects, the country has 16 completed projects, equivalent to about 3,314 units. Although the number of projects decreased by nearly 24% compared to the same period in 2023, it still increased by more than 77.7% compared to the previous quarter.

With newly licensed projects, in the third quarter of 2024, there will be 23 projects with a scale of about 11,669 units. The number of projects is 21% more than the previous quarter and an increase of 53.3% compared to the same period in 2023.

According to CBRE, in the first 9 months of 2024, the total supply of new apartments for sale in Hanoi reached the highest level in the past 5 years. Photo: Thanh Vu

For projects eligible to sell future housing, last quarter there were 55 projects nationwide with a scale of about 21,374 units. The number of projects increased by 10% compared to the second quarter of 2024 and increased by 17% compared to the same period last year.

With ongoing projects, the country has up to 939 projects with a scale of about 426,158 apartments. Although the number of these projects decreased by about 5.9% compared to the previous quarter, it increased by 8% compared to the same period last year.

Even in the social housing segment, supply remains relatively good. In the third quarter of 2024, there were 8 projects implemented nationwide with a scale of about 4,960 units, 569 more than the previous quarter. In summary, there are currently a total of 622 social housing projects implemented nationwide, equivalent to 565,177 units.

Despite such an increase in supply, housing prices remain high. According to the Ministry of Construction, apartment prices in some places have increased by 35-40% compared to the previous quarter, and the affordable segment has been almost "erased" from the market. Faced with this situation, the Ministry has pointed out four main reasons for the continuous increase in housing prices in recent times.

“Real estate prices are rising partly due to increased fluctuations in land-related costs, as well as the impact of applying new calculation methods and land price tables,” the Ministry of Construction stated as the first reason.

Notably, in some localities, there is also a phenomenon of land auctions with winning prices many times higher than the starting price. This stems from poor management and implementation of auctions in some localities. In addition, many investors also form associations and groups to participate in paying high prices, then abandon their deposits after winning the auction, with the aim of establishing a virtual price level in the area to make a profit.

When local real estate prices increase, the cost of implementing projects for businesses will also increase, thereby pushing up the output price of products.

The second reason for the high housing prices comes from the phenomenon of "creating virtual prices" and "inflating prices" by speculators and individuals working as real estate brokers.

“These are individuals who work as freelance brokers, do not have real estate brokerage certificates, are weak in expertise, have limited legal knowledge, lack professionalism, and are weak in business ethics, leading to opportunistic business practices and colluding to fix prices,” the Ministry of Construction stated.

The third reason for the "heating up" of real estate prices comes from the shortage of affordable housing supply in urban areas, especially Hanoi and Ho Chi Minh City. According to the Ministry of Construction, the cause of this stems from the difficulty and entanglement of businesses in legal procedures, especially in determining land prices, calculating land use fees, site clearance, and land allocation.

"In addition, many businesses also face difficulties in obtaining credit loans and capital from issuing corporate bonds," the Ministry added.

Finally, the fourth reason for the increase in housing prices is due to economic fluctuations. The ups and downs of the stock market, bonds, gold... have affected the psychology of people and investors. This leads to a trend of shifting cash flow to real estate as a safe haven for savings and investment capital.

According to the Ministry of Construction, the number of completed projects, newly licensed projects, and projects eligible to sell houses "on paper" all increased in the third quarter of 2024. However, when supply is abundant, the market still has reasons for high house prices.

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