Hanoi’s supply of budget apartments priced below VND30 million ($1,179) per square meter has dropped 47% every year since 2020, according to real estate service firm Savills Vietnam.
A Q1/2024 report by the firm says the supply of apartments in Hanoi surged 41% quarter-on-quarter and 99% year-on-year to 4,062 units in the first three months. Of these, low-cost apartments made up just 4% and were completely sold out, highlighting a severe shortage in the budget segment and an imbalance between supply and demand in the market.
The primary supply of apartments in the capital city reached 12,928 units in Q1/2024, up 9% quarter-on-quarter but down 34% year-on-year. Their average price was VND59 million ($2,319)/sqm, up 3% quarter-on-quarter and 14% year-on-year.
Do Thu Hang, senior director of advisory services at Savills Hanoi, said that mid-end apartments priced between VND30 million and below VND50 million/sqm (($1,179-$1,965) accounted for the biggest portion at nearly 90% of total supply.
Annual demand for apartments in Hanoi and the southern economic hub of Ho Chi Minh City has been estimated at 50,000 units each. However, supply constraints have led to pent-up housing demand, the report says.
Some macroeconomic factors at play include the volatile gold market and low interest rates at banks, prompting investors to seek out viable long-term investment opportunities. As a result, demand for Hanoi apartments was on the rise, Hang explained.
She also said that while primary prices remained high, the secondary market has also recorded a hike in transactions and prices compared to previous periods. Historically, the secondary market has maintained a reasonable pricing level, but its prices surged in the early months of this year.
The report says apartments are no longer considered liabilities, as was the case several years ago. Today, buyers see apartments in major cities as valuable assets and are prone to make quick purchasing decisions.
However, Hang pointed out that this trend does not reflect the entire market. With apartment projects, if prices are not aligned with product quality, buyers are unlikely to make a purchase. Hanoi projects attracting buyers in Q1 were deployed by reputable developers, which offered assurances of quality and legal compliance.
Given the abrupt jump in Hanoi apartment prices, Hang recommended that buyers thoroughly consider projects or explore more affordably priced options in northern provinces adjacent to Hanoi like Hung Yen and Bac Ninh.
She said housing supplies in Hanoi’s neighboring localities will increasingly meet the capital city’s demand. The aforesaid two provinces are set to put 203,000 apartments on the market in 2024-2026. Furthermore, amended laws related to real estate and land are expected to give a boost to the local real estate sector. Some 84,400 apartments from 101 projects are projected to be up for sale, starting 2025, she added.