Speculative groups stand behind Hanoi apartment fever: association
The recent apartment fever that has swept in Hanoi shows signs of being impacted by speculative groups who have created virtual supply and demand to push prices up, according to the Vietnam Association of Realtors (VARS).
The association said that since 2018, policies related to capital sources and decisions by relevant agencies to control the real estate market have changed, causing a serious decrease in housing supply. Constantly increasing demand for housing has put pressure on supply, pushing prices up, especially for the apartment segment in the capital city in Q1/2024.
Apartment prices in Hanoi have increased for dozens of consecutive quarters. The apartment price index in Hanoi in Q1/2024 rose 48% compared to the same quarter of 2019 and 8 percentage points from Q4/2023 - the highest expansion in the past five years.
Regarding the cause, VARS found that the increase in apartment prices in Hanoi is due to the continuous improvement of infrastructure, thus hiking real estate value. However, the price increase of up to 3-4 times is unreasonable, it noted.
Besides, the Hanoi market is too short of supply while the demand for housing is always high and on an increasing trend, it added.
The price increase is also due to high investment demand when large cash flows are running into real estate in the context of bank interest rates hitting the "bottom". At the same time, the demand for investment in apartments for rent has been driven by the accommodation needs of a large number of international tourists, foreign experts, and students.
According to VARS, by 2025, Hanoi's population is expected to reach 9 million people, with the urbanization rate estimated at 62%. Of them, 5.58 million people will live in urban areas, up from more than 4.13 million in 2022 and equivalent to about 120,000 new urban households each year.
According to Hanoi's housing development plan for 2021-2025, the total demand for the period is 185,200 houses, including 166,600 apartments. Meanwhile, the number of new apartments opened for sale in the capital is continuously decreasing.
Last year, the supply of new apartments only approximated 11,000, equal to 66% of the figure in the same period in 2022. In Q1/2024, the entire Hanoi market recorded only 3,000 new apartments for sale.
"From now until 2025, Hanoi will face a shortage of about 50,000 apartments. Meanwhile, the number of newly licensed commercial housing projects is continuously declining, and affordable apartments are completely absent from the market," VARS said.
The association believed that the increase in Hanoi apartment prices due to scarcity is an effect of the supply-demand rule. Supply is smaller than demand, forcing prices to increase to ensure balance.
Although the price increase shows signs of being impacted by speculative groups who have created virtual supply and demand to push up prices in the market, it is difficult to identify and handle acts of apartment speculation and price inflation.
The right to determine the selling price belongs to the property owner and the parties engage in a purchase and sale transaction when they reach an agreement, said VARS. In the context of scare supply, individuals and businesses with goods have an advantage in setting prices. It is inevitable that sellers will push prices when products are scarce in the market, it added.
"To stabilize apartment prices, there needs to be coordination between state agencies and market participants," the association stated.
To make house prices stable, VARS recommended that state agencies continue to promote the development of transportation infrastructure to shorten travel time from the satellite area to the city center. Increasing supply from suburban areas will drag down housing prices.
Efforts need to be made to speed up the progress of social housing projects; proactively regulate supply by effectively using tools to make and adjust planning schemes; arrange more clean land funds to help investors implement social housing projects right after planning schemes are made, the association added.
It is necessary to soon approve a pilot project to implement commercial housing projects in case the developer agrees to receive land use rights or has the right to use residential land or other land to promote apartment supply; speed up the renovation and construction of old apartments, and consider imposing progressive tax rates on real estate owners based on the number and scale of properties to ease motivation for speculation.
For customers and investors, VARS recommended that in this context, they should be alert and choose suitable products with guaranteed financial and legal capabilities; and absolutely not follow the "fever".
“Developers need to adjust selling prices to reasonable levels and strictly control distribution channels. Exchanges and brokers should deliver appropriate consultations, not work for personal gains, and provide maximum support for customers' trading activities," it added.
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