High selling prices have negatively affected the low-rise housing market.

The indicators are still in the "bottom" zone.

According to the Q3/2023 real estate market research report recently published by Batdongsan.com.vn, interest in low-rise housing in major cities like Hanoi and Ho Chi Minh City is experiencing a significant decline.

Specifically, searches for townhouses decreased by 52%, semi-detached villas by 48%, and detached houses by 42% compared to October 2022. Searches for townhouses in Ho Chi Minh City also decreased by nearly 70%, while searches for townhouses in Hanoi decreased by almost 80% compared to the same period in 2022.

Similarly, research data from other research units also shows that the liquidity of this type of asset remains at its "bottom" and shows no signs of recovery.

For example, data from Savills Vietnam shows that in the third quarter of 2023, Ho Chi Minh City had approximately 766 low-rise houses for sale, with only 64 successful transactions, the lowest since 2018, a decrease of 43% quarter-on-quarter and 82% year-on-year. Thus, the absorption rate was only 8%.

According to Cushman & Wakefield, in the first nine months of 2023, the Ho Chi Minh City market saw approximately 448 new landed houses offered for sale. However, the sales rate decreased by 74% compared to the same period in 2022.

Poor liquidity in low-rise housing has led developers with available inventory and land for this type of housing to remain cautious, even temporarily suspending sales, limiting marketing, and delaying the launch of new projects until next year.

High selling prices have negatively impacted the low-rise housing market (Figure 1). — Absorption rates for some types of low-rise housing remain low.

Many projects that were on sale last quarter have temporarily suspended sales this quarter to complete legal procedures, awaiting market recovery and the completion of surrounding infrastructure projects.

Meanwhile, in existing projects, some developers continue to apply diverse sales and lending policies, as well as rental guarantee policies, to attract buyers. However, the absorption rate of low-rise housing remains difficult to improve.

According to a survey conducted by Batdongsan.com.vn on 5,000 real estate brokers, 57% of participating brokers reported a 50% decrease in successful transactions for low-rise housing in the past quarter; 28% of them confirmed a 10-50% decrease in transactions.

Many real estate agents believe the main reason for the sluggish sales of low-rise houses stems from the fact that their selling prices are too high; as high-value properties, the purchase costs are high and financing is difficult to obtain.

The reason still lies solely in the price.

According to market research data from Batdongsan.com.vn, the average asking price for street-front houses in Hanoi in Q3 2023 was 333 million VND/m2 and in Ho Chi Minh City was 209 million VND/m2. Meanwhile, the average price for detached houses also reached 124 million VND/m2.

Not only are selling prices remaining high, but observations in some areas show a slight increase in average selling prices despite a lack of liquidity. Maintaining high prices has negatively impacted investor sentiment, as factors such as increased borrowing capacity, higher financing costs, and profitability are affected. This is especially concerning given the current difficulties in the low-rise rental housing market.

High selling prices have negatively impacted the market for low-rise housing (Figure 2). — The wave of land returns has also made many investors hesitant about low-rise residential buildings intended for commercial use.

As for the demand for housing for personal use, the need for low-rise housing is currently not very high. The focus is mainly on apartment buildings due to many advantages such as security, amenities, loan availability, and especially affordable prices. Therefore, low-rise housing is quite "neglected" in the market because it doesn't meet actual needs.

Commenting on this type of property, Mr. Dinh Minh Tuan - Director of Batdongsan.com.vn in the Southern region - said that high selling prices are one of the biggest obstacles for buyers who want to buy low-rise houses at the present time. Most types of low-rise real estate are priced much higher than the average income of the people and are high-value products that are difficult to finance with loans.

Meanwhile, tourism and retail activities have not grown strongly due to the impact of the macroeconomic situation and the aftermath of the Covid-19 pandemic. Therefore, it will take a long time for the street-front property market to recover, possibly until the third quarter of 2024.

Source