Skyrocketing, when will apartment prices cool down?

According to the real estate market report for the first quarter of 2024 by PropertyGuru Vietnam, in the first quarter, apartment prices continued to increase. After 6 years, the average price increase of apartments in Hanoi reached 70%.

At the beginning of 2018, the selling price of apartments in Hanoi and Ho Chi Minh City was 27 and 31 million VND/m2, respectively. After 6 years, the average price increase of apartments in Hanoi reached 70%, surpassing Ho Chi Minh City (price increase of 55%).

According to a report by PropertyGuru Vietnam, apartment prices in Ho Chi Minh City will continue to increase by 2-5% compared to the same period in 2023.

In particular, the selling price of high-end apartments in Ho Chi Minh City (price above 55 million VND/m2) increased by 5%; mid-range (price 35-55 million VND/m2) increased by 2% compared to the same period in 2023.

Apartment prices in the center of big cities continue to increase (Photo: Cong Hieu).

According to experts, housing prices cannot continue to increase. If the scenario of more than 10 years ago repeats itself, when affordable housing projects increase and the supply-demand balance is balanced, housing prices will decrease.

Mr. Nguyen Anh Que, Chairman of G6 Group, acknowledged that the reason for the increase in apartment prices, besides the increase in input costs, also comes from the fact that businesses are entangled in too many legal procedures, leading to a prolonged period of time and supply not meeting demand.

However, according to Mr. Que, the fact that apartment prices are increasing does not mean that they cannot decrease. The proof is that in the past, in the period of 2008 - 2010, there were apartment projects priced at 50 - 70 million VND/m2. However, in 2011 - 2013, when the market saw the appearance of low-cost commercial housing projects, averaging at 11 - 15 million VND/m2, apartment prices on the market immediately cooled down.

For example, in 2010, the Indochina Plaza apartment project on Xuan Thuy Street (Cau Giay, Hanoi) had an average selling price of 50 - 60 million VND/m2. But by 2013, when supply increased, the price of many apartments in this area was only 30 - 35 million VND/m2. After more than 10 years, the price of apartments here is now around 100 million VND/m2.

With actual developments, the representative of G6 Group commented that if the old scenario repeats, housing prices may decrease from 2026. The reason is that housing projects in general and social housing projects in particular will begin to complete procedures, increasing supply in about a year later, helping to cool down housing prices.

According to the Vietnam Association of Realtors (VARS), after a long period of decline, the supply of apartments in Hanoi and Ho Chi Minh City is expected to increase again, thanks to the recovery of the market and efforts to remove legal obstacles for projects by state management agencies.

In particular, the supply of social housing and worker housing will be launched in the market in the near future. However, the supply from these products needs time to complete legal procedures before being 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.

However, by mid-2025, when legal documents related to the real estate sector come into effect to ease difficulties for investors and buyers of social housing and housing for workers, housing prices may cool down.

“ The supply of social housing will increase, and apartment prices will drop to a level more suitable for people with real housing needs ,” VARS said.

According to Ms. Duong Thuy Dung - Senior Director of CBRE Vietnam - affirmed that apartment prices cannot increase forever, apartments will increase until they reach the "endurance threshold" and affordability of home buyers.

Many experts predict that house prices will decrease from mid-2025.

According to Ms. Dung, the clearest proof of this reality is that apartment prices in Ho Chi Minh City, after continuously increasing from 2017-2019 and reaching a peak, have leveled off and remained stable by 2022.

"Apartments in Ho Chi Minh City have reached a price that people can no longer afford," Ms. Dung commented.

In the Hanoi apartment market, Ms. Dung believes that prices will continue to increase until they reach an average price of 100-200 million VND/m2, then they will be forced to stop.

" Of course, this price increase will depend on the location and quality of each project. Project locations currently at 70 million VND/m2 will continue to increase until reaching 100-120 million VND/m2. Project locations currently at 30-40 million VND/m2 can increase to 50-60 million VND/m2 depending on the quality of the apartment and the reputation of the investor, " said Ms. Dung.

Besides, according to experts, when the Land Law comes into effect, housing supply will increase and then housing prices will cool down.

Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), emphasized that the 2024 Land Law, implemented half a year earlier, will promote the development of market supply, thereby lowering housing prices.

Recently, the prolonged shortage of apartment supply has pushed up the price of apartments in Hanoi abnormally high, even in suburban areas, the selling price is 60-70 million VND/m2, equal to the price of land. In the city center, there are projects with prices of nearly 300 million VND/m2.

According to research by PropertyGuru Vietnam, recent new projects only contribute about 20,000 - 30,000 apartments per year, while the normal demand is up to 70,000 - 80,000 apartments/year.

Sharing the same view, Dr. Nguyen Van Dinh, Chairman of the Vietnam Association of Realtors (VARS), further analyzed: The Land Law coming into effect soon will help many projects to be quickly cleared of obstacles for implementation and completion. From there, the supply for the market will increase, contributing to reducing the current pressure on supply and demand. Housing prices will gradually decrease to a reasonable level, more suitable for people's income.

In addition, when investors have easier access to land, the cost of project development also has the opportunity to decrease thanks to the shortened legal completion process. Product prices have the opportunity to be adjusted.

Chau Anh

Source