HCMC needs 50,000 apartments per year to meet demand: Savills

Ho Chi Minh City will need about 50,000 new apartments each year to meet demand, with 60-70% in the affordable segment, but current supply is falling way short, according to Savills Vietnam.

Primary supply in the first quarter decreased sharply by 35% quarter-on-quarter and 28% year-on-year to 4,922 units. 82% of this supply was concentrated in Thu Duc city, Binh Tan district, and Binh Chanh district.

The quarter's sales volume reached 1,116 units, a 63% decrease from the previous quarter but a 29% increase year-on-year. Grade C products were popular among customers, accounting for 61% of the quarterly sales market share, followed by grade B at 37%. New supply fared well, with a 68% absorption rate, whereas inventory absorption was limited at 16%.

Just 42 new townhouses and villas were listed for sale in Q1, an 11% decrease from the previous year. The supply came from the Dong Tang Long-Hung Gia project (District 9) at an average cost of around VND10 billion ($394,555). However, the project still has no occupants.

The constrained supply has lasted for three years, primarily due to regulatory impediments, resulting in a limited number of new projects. The entire primary supply currently on the market is 762 units. Products costing more than VND30 billion ($1.18 million) account for 76% of the market share. In particular, 85% of primary supply is concentrated in Thu Duc city.

Many projects are also offering huge discounts of up to 24% on regular payment methods in order to attract customers and increase sales, or they are willing to prolong the payment time to five years.

Furthermore, the market anticipates that lower housing loan interest rates will improve demand and transaction volume when new developments become available.

Surrounding areas lead new supply

Giang Huynh, deputy director of the research and S22M department at Savills, stated that future supply in HCMC is unlikely to match the above-mentioned demand. Even the combined supply of adjacent provinces, including Binh Duong, Dong Nai, and Long An cannot fulfill the current demand in HCMC.

"This is a result of years of pent-up supply and demand mismatch," Giang Huynh said.

Giang Huynh assessed that people have started moving to the suburbs over the past few years because there is no longer property available in HCMC, and this can be seen clearly in the Binh Duong market. The province has been re-developing apartment projects to target customers in HCMC, with prices for a two-bedroom apartment at around $2 billion (78,911), suitable for small families.

In bordering areas, as infrastructure improves and travel time is reduced, the market for land opens up, allowing investors to construct inexpensive housing. However, Giang Huynh said that greater government support is needed to promote this segment.

HCMC continues to face short-term issues due to a lack of new supply and high sales prices. Last year, products under VND2 billion ($78,911) disappeared from the market, to be replaced by products priced between VND2 billion ($78,911) and VND5 billion ($197,277), which accounted for approximately 90%.

From 2024-2026, the supply of apartments priced between VND2 billion ($78,911) and VND5 billion ($197,277) is likely to decline dramatically, while products priced between VND5 billion and VND10 billion will emerge as market leaders, the Savills representative said.