Supply continues to dwindle
According to Savills' report, in the third quarter of 2023, the supply of new apartments in Hanoi in the quarter continued to decrease by 47% quarter-on-quarter and 65% year-on-year, down to 1,891 Class B apartments. Notably, the market did not record any new supply of Class A and C in the last quarter.
Primary apartment supply reached 19,808 units, down 3% QoQ and 6% YoY, with Grade B accounting for 92% of supply. The number of apartments sold continued to decrease by 16% QoQ and 42% YoY, reaching 2,100 units.
Supply continues to dwindle. (Photo: KL)
Regarding the supply of villas/townhouses, the market did not record any new projects, only 30 new units from the existing project in Thanh Tri.
New low-rise supply decreased by 76% QoQ and 94% YoY. Units sold in Q3/2023 decreased by 5% QoQ and 66% YoY to 101 units. Quarterly absorption rate reached 14%, up % QoQ but down 11% YoY.
High inventory prices have led to an increase in primary prices across all product types. Primary apartment prices reached VND54 million/m2, up 2% quarter-on-quarter and 13% year-on-year.
According to records, primary apartment prices have increased for 19 consecutive quarters and are 77% higher than in the first quarter of 2019. Similarly, the average primary villa price increased by 3% quarter-on-quarter, to VND103 million/m2 of land.
Townhouse prices also increased by 9% quarter-on-quarter, to VND190 million/m2, while shophouse prices also recorded a 6% quarter-on-quarter increase.
Limited new primary supply has helped the secondary market gain popularity. In the apartment market, the average secondary price reached VND36 million/m2, up 2% quarter-on-quarter and 8% year-on-year. Meanwhile, the average secondary price of low-rise products reached VND23 billion/unit, up 5% quarter-on-quarter, but still 19% lower than the price of primary products.
Looking ahead, Savills’ report suggests that apartment and villa supply will continue to be limited, with new supply being mainly Grade B. In 2023, 9,500 apartments will be delivered.
From 2021 to 2025 , the number of handed-over units is expected to decrease by 26% per year, which is expected to boost secondary demand and strengthen investor confidence. By 2025, 52,500 apartments from 51 projects will be launched, of which Grade B will remain the largest source of supply with 76% of future supply.
Interest rate reduction, is it enough to support the real estate market?
Commenting on the market in the last quarter, Mr. Matthew Powell, Director of Savills Hanoi said: The market in the quarter was slow with low transaction volume and investors' caution before launching new products.
“However, the market still recorded new positive signals contributing to the gradual recovery. These include the formation of new districts and the positive progress of infrastructure projects,” said Mr. Matthew Powell.
Specifically, in the first 9 months of 2023, Gia Lam accounted for 31% of primary apartment supply and 6% of low-rise supply in Hanoi. 29% of apartment transactions were also recorded in Gia Lam.
The market's advantage is that interest rates have been adjusted appropriately. (Photo: DM)
Since 2019, the primary price of apartments here has increased by 13%, with the low-rise primary price increasing by an average of 18%/year. It is expected that from the fourth quarter of 2023 onwards, Gia Lam will have an additional future apartment supply of 8,700 units.
In addition, the housing market in Gia Lam and the east of Hanoi will continue to improve thanks to the development of infrastructure such as Vinh Tuy Bridge phase 2.
Infrastructure will also play an important role in the recovery of the real estate market. Ring Road 4 started construction in June, and to date, the site clearance work has been more than 86% complete, with the goal of completing 100% by the end of 2023.
Once completed, the route will benefit 77 existing and future projects with 33,400 apartments in the areas Ring Road 4 passes through by 2027.
Commenting on the next developments of the market in the coming time, Ms. Do Thu Hang, Senior Director, Consulting and Research Department, Savills Hanoi shared: According to annual practice, in the fourth quarter of the year, cash flow from sources is likely to improve thanks to maturities at the end of the year, which may be a driving force to support buyers in making decisions to buy a house.
“At the same time, another advantage of the current market is that interest rates have been adjusted appropriately. This will partly promote home buyers’ decisions,” said Ms. Hang.
In addition, Ms. Hang also commented that in recent times, the Government has issued a number of documents to resolve difficulties and problems in the market. This has created a foundation for investors to be approved for new projects and introduce new product lines to the market. Once there is clarity in regulations, the market will move towards sustainable development.
According to Ms. Hang, recently the Government has been very active in accelerating public investment progress, thereby improving economic activities, supporting the real estate market to attract more cash flow and increase demand.
"In addition, the amended laws, if passed in the coming time, will create conditions for the housing market to develop. Long-term housing demand will remain high with a positive net migration rate, population growth and high urbanization rate. These are positive signals that have appeared in recent times," Ms. Hang commented.
However, Ms. Hang also pointed out that the market still has many challenges, such as the gap between supply and demand and prices remaining high. The market mainly records demand for affordable housing, but the proportion of supply in this segment in the entire market remains low.
“The supply of affordable housing is increasingly limited. The clearest example is the proportion of primary supply of affordable apartments (class C apartments) in 2015 in the Hanoi market, which reached 51%. This proportion has gradually decreased, up to the present time, according to Savills' records in the third quarter of 2023, it is 5% of the total primary supply in the whole market,” the expert commented.
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