Why are apartment prices continuously rising?

The demand for apartments has been on the rise while the supply remains limited. According to research conducted by the Vietnam Real Estate Brokers Association, apartment prices in Hanoi have increased by approximately 38% since 2019, while prices in Ho Chi Minh City have risen by 16%. This increase in prices can be attributed to the continuous growth in market demand. Additionally, a survey conducted by Batdongsan.com.vn shows that the level of interest in apartments nationwide in January 2024 has increased by 66% compared to the same period in 2023, with the number of property listings also increasing by 46%.

Limited supply and increasing demand

The prices of both primary (sold directly from developers) and secondary (resale) apartments have been consistently increasing in Hanoi. Similarly, apartment prices in Ho Chi Minh City have also started to rise again, along with a slower decline in prices for high-end projects in the resale market. The primary reason for these price increases is the continuously growing market demand. Furthermore, the supply of apartments has been hindered by legal challenges, resulting in a shortage of available units. In 2023, the supply of new apartments reached its lowest level in a decade, with just over 10,000 units available.

Image: Meeting the demand for social housing will help cool down apartment prices. Photo: Như Ý.

According to Ms. Đỗ Thu Hằng, Senior Director of Research and Consultancy at Savills Hanoi, apartment prices in Hanoi are currently at a very high level. The average price for primary apartments in the market is around 58 million VND per square meter. The continuous increase in apartment prices in Hanoi can be attributed to high construction costs and the development of infrastructure, which drives up real estate prices. Additionally, legal obstacles have further restricted the supply of apartments. In 2023, the supply of new apartments reached the lowest level in a decade, with only over 10,000 units available.

Mr. Nguyễn Văn Đính, Chairman of the Vietnam Real Estate Brokers Association, predicts that in the short term, apartment prices in the central areas of major cities will continue to rise, especially in the affordable and mid-range segments. However, resale prices for high-end projects may experience a slight decrease.

Accelerating social housing investment

To improve the affordability of apartments, the first step is to address the supply issue. The development of affordable social housing will greatly help reduce the average selling prices of apartments. In response to the imbalance in product structure, the Prime Minister has instructed the Ministry of Construction to guide businesses in restructuring and reducing prices of products. This includes implementing suitable and timely solutions for restructuring segments that cater to those with genuine needs, social housing, worker housing, and low-income housing.

According to a report from the Ministry of Construction, Hanoi is expected to complete three social housing projects with nearly 1,200 units this year, while Ho Chi Minh City plans to complete six projects with a total of nearly 3,800 units. The Prime Minister’s plan to complete one million social housing units by 2030 includes a target of 18,700 units for Hanoi and over 26,000 units for Ho Chi Minh City.

Mr. Hoàng Hải, Director of the Department of Housing and Real Estate Market Management at the Ministry of Construction, stated that after the implementation of the 120 trillion VND credit package, 27 provinces have announced lists of 63 social housing projects eligible for loans under this program, with a capital demand of 28 trillion VND. “Some projects in localities have already disbursed funds from this credit package. If projects with approved permits and investment decisions are completed on time, we will essentially achieve the target of 428,000 housing units by 2025. In the near future, the Ministry of Construction will collaborate more closely to accelerate the progress of social housing projects, ensuring timely credit needs for the implementation of preferential loans,” said Mr. Hải.

By addressing the supply-demand imbalance through increased social housing investment, it is possible to alleviate the upward pressure on apartment prices and provide affordable housing options for the growing population.

This article was created for Business Today.
Business Today