Real Estate Segments Thrive, Younger Buyers Drive Growth
The real estate market in Vietnam is experiencing a surge in both prices and demand, with younger buyers becoming a dominant force. This trend was highlighted at the recent event “Real Estate Market Trends 2024”, where Vo Huynh Tuan Kiet, Director of Residential at CBRE Vietnam, revealed that apartment prices in Hanoi are increasing at a faster rate than in Ho Chi Minh City. Prices for apartments in Hanoi have risen by around 15% since the beginning of 2023, primarily due to a shortage in supply and the introduction of high-end properties.
CBRE’s report also indicates that both Hanoi and Ho Chi Minh City have seen a shift in the real estate market. Hanoi is now following the path of Ho Chi Minh City from three years ago. By the end of 2023, the average primary selling price in Hanoi reached 53 million VND per square meter, a 14.6% increase from the previous year. In comparison, the primary selling price in Ho Chi Minh City was slightly higher at 61 million VND per square meter, but it experienced a 1.7% decrease compared to 2022. This slight price advantage in Hanoi has resulted in a higher number of apartment transactions in recent times.
In terms of the secondary market, Hanoi and Ho Chi Minh City have experienced contrasting trends. In the fourth quarter of 2023, Hanoi witnessed a continuous increase in prices, reaching an average of 33 million VND per square meter, a 5% increase compared to the previous year. Limited supply and the introduction of high-priced projects contributed to the vibrant atmosphere in the secondary apartment market in Hanoi. Conversely, the secondary market in Ho Chi Minh City saw a decrease of 5% for apartments and 2% for low-rise houses, with average prices of 45 million VND per square meter and 140 million VND per square meter, respectively. However, the rate of price decrease in Ho Chi Minh City has gradually slowed down in the last quarter of the year.
Despite rising prices, the demand for apartments in the mid-range and high-end segments remains strong. According to the latest data from Batdongsan.com.vn, the number of property searches in January and February 2024 significantly surpassed the total for the entire year of 2023. Specifically, searches for apartments in Hanoi increased by 71% compared to the same period, while in Ho Chi Minh City, the increase was 59%. This positive trend indicates a relatively optimistic outlook for the real estate market, especially in the apartment segment. The lower interest rates and improved buyer sentiment in the third and fourth quarters of 2023 led to a 60% increase in apartment sales in Hanoi and a doubling of sales in Ho Chi Minh City compared to the first half of the year, according to CBRE data.
The demand for apartments comes not only from families, workers, and students in the city but also from a significant number of investors who recognize the potential for rental income and long-term investment in a volatile market.
Interestingly, the demographics of apartment buyers are getting younger. According to a survey by Property Guru, individuals aged 22 to 39 accounted for the highest demand in 2023. Particularly, the group aged 22-35 saw an increase in property purchasing intention from 39% in 2021 to over 42% in 2023.
Developers have taken notice of this trend and are catering to the younger market. For example, the Grand Sunlake project in Hanoi’s Van Quan district has generated significant interest with its newly introduced Bespoke Collection – a series of cash-home properties priced from 43 million VND per square meter, accompanied by attractive incentives such as a 5% discount for fast payments of 70% and a 9% discount for fast payments of 95%. Buyers utilizing bank loans can enjoy up to 70% financing, and the developer offers a 0% interest rate and an 18-month principal payment grace period. This reasonably priced project has attracted considerable attention and achieved excellent sales performance in previous phases.
Despite the increasing demand and rising prices, the real estate market is still facing a limited supply. Research data from various sources indicate that the supply of both Hanoi and Ho Chi Minh City reached its lowest point in the past decade by the end of 2023. The scarcity of supply is expected to continue into 2024. Trang Bui, General Director of Cushman & Wakefield, acknowledges the strong demand from homebuyers but points out the inadequate supply of new housing projects. In 2023, Hanoi’s new supply of apartments is estimated at 10,500 units, a decrease of 31% compared to the previous year. Meanwhile, Ho Chi Minh City’s new supply is expected to reach nearly 7,500 units, a decline of more than 50% from 2022.
The scarcity of housing supply is due to the lack of new approved projects and the challenges faced by ongoing projects related to legal issues and funding. Although efforts have been made to address these difficulties, the overall housing supply remains limited.
In the short term, the supply is expected to remain constrained, while the strong demand will likely keep prices at a high level. Nguyen Van Dinh, Chairman of the Vietnam Association of Realtors (VARS), believes that the prices of inner-city apartments will continue to rise due to high demand and limited supply. Furthermore, the increase in input costs, such as materials, labor, and land prices, have also positively influenced apartment prices. However, 2024 is expected to be a pivotal year, marking the beginning of a new phase in the market. It is also the year when the market overcomes obstacles and moves towards positive change. The apartment segment is expected to lead the market, driven by the still considerable housing demand.
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