Hanoi apartment market continues to have imbalance between supply and demand

Housing demand in Hanoi continues to be pent up

Savills Hanoi Real Estate Market Report Q1 2024 shows that apartment supply recorded in Q1 2024 increased by 41% quarter-on-quarter and 99% year-on-year to 4,062 units. Primary supply in the quarter reached 12,928 units, up 9% quarter-on-quarter but down 34% year-on-year.

The supply-demand imbalance in the apartment segment continues to exist. The market continues to record a shortage of products under VND30 million/m2 (Grade C), these products account for only 4% of new supply and have been sold out. Since 2020, the primary supply of Grade C has decreased by 47% per year.

Ms. Do Thu Hang, Senior Director, Consulting and Research, Savills Hanoi, commented: “The supply is mainly focused on Class B apartments, accounting for nearly 90%. The Class C apartment segment in the primary market and Class A apartments only account for a very small proportion. Moreover, from now until the end of the year, although major laws have been passed, the new supply has not been able to improve.”

Real Estate - Hanoi apartment market continues to have an imbalance between supply and demand — (Source: Internet)

Meanwhile, in both major cities Hanoi and Ho Chi Minh City, the annual natural demand for housing is about 50,000 houses. This is the result of immigration, moving out of the home of adults and the average number of people in a house decreasing... This demand has not been met by limited supply for a while, causing pent-up demand for housing. In addition, macro factors such as the fluctuating gold market and low interest rates have made investors look for reasonable and long-term investment channels, which has invisibly increased the demand for apartments in the Hanoi market.

When comparing product lines, buyers with real housing needs can see that apartment prices are still more reasonable than those of land-attached products in the project such as villas and townhouses. This leads to the story of recording an increase in demand and primary prices of the apartment segment in the first quarter of 2024. Savills' report in the quarter shows that the primary price of apartments in Hanoi reached VND 59 million/m2, up 3% quarter-on-quarter and 14% year-on-year.

Furthermore, under the condition that primary prices are anchored at high levels, the secondary market also recorded increased transaction volume and prices have also increased compared to previous prices. The secondary market in the previous period also had a more reasonable price level than primary prices, however, with the increasing demand for housing, secondary prices in the first months of 2024 also recorded an increase.

According to Ms. Hang, the psychology of buyers has changed. The view that apartments are "consumables" seems to have been a thing of the past, but now this view has changed, buyers are gradually realizing that apartment products in big cities are also an asset. Even if in the past, the decision to buy an apartment needed to be considered for a long time because it was also considered a large amount of money, recently home buyers do not wait too long to make a decision to buy. The decision to buy is now made faster and the deposit is also faster.

However, she also explained that this is not the story of the entire market: “For apartment projects where the price does not match the quality of the product, buyers may not make a quick decision. The projects in the first quarter of 2024 that attract the attention of the market are all projects from reputable investors with products that, once launched on the market, have a certain guarantee of quality as well as other legal factors. At the same time, these investors often use leading brands and consulting units, from design units, landscape design units to product design. Many projects have even been selected by investors with reputable foreign units to enhance the reputation of the project itself. Good projects, reputable investors, and guaranteed legality are the projects that record a positive transaction volume.”

Shift of demand to affordable areas

Faced with escalating prices, some projects have been priced beyond their actual value. Ms. Hang advised buyers to carefully consider the value of use and the reasonableness of the project.

“In general, if prices continue to increase, buyers will consider their financial situation. While real housing demand still accounts for the majority, if prices continue to rise, buyers can consider and choose to rent apartments in the inner city, or accept shifting demand to supply in neighboring provinces of Hanoi with reasonable prices,” said Ms. Hang.

Real estate - Hanoi apartment market continues to have an imbalance between supply and demand (Figure 2). — Ms. Do Thu Hang, Senior Director, Consulting and Research, Savills Hanoi

Homebuyers with real housing needs can choose from supply in neighboring localities such as Hung Yen or Bac Ninh, belt 4 or belt 3.5, thanks to infrastructure development. Infrastructure is still the most important lever in changing the value structure of the housing market. Infrastructure development will bring suburban areas “closer” to the city center, helping to reduce travel time. Above all, in neighboring provinces or suburban areas, investors can access land at lower costs, creating a more affordable housing supply.

It is known that products in neighboring provinces will increasingly meet Hanoi's housing needs. Hung Yen and Bac Ninh will provide about 203,000 apartments from 2024 to 2026. The revised laws are expected to facilitate the development of the real estate market and bring certain improvements to the supply. From 2025 onwards, the market will have about 84,400 apartments from 101 projects for sale.

N.Giang

Source