With interest rates pegged at high levels, investors are forced to sell off their properties and liquidate their apartments.
According to a report by Savills Vietnam, in the first quarter of 2023, the supply of apartments in Hanoi and Ho Chi Minh City continued to decline sharply. Specifically, in Ho Chi Minh City, the total supply of apartments in the quarter reached over 1,600 units, a decrease of 25% compared to the same period last year. Meanwhile, in Hanoi, the total supply of apartments in the quarter reached over 2,000 units, a decrease of 27% compared to the same period last year.
The secondary market for apartments is booming, due to significantly lower prices compared to new apartments. (Photo: VV)
In Hanoi's market specifically, the decline in the supply of new apartments has led to a continued increase in prices for this segment. Between 2018 and 2022, the price of newly launched apartments increased by an average of 13% per year. Thus, over four years, the average price increase was 52%.
In contrast to the primary market, which is experiencing a supply shortage and rising prices, the secondary market (the buy-and-sell market) offers apartments that have had at least one previous owner at attractive prices, up to 48% lower than new apartments in the same project. This has fueled a more vibrant secondary market.
Ms. Nguyen Hong Dung, Senior Manager of Residential Business Services at Savills Ho Chi Minh City, stated: "The secondary supply in the market is also showing a slight upward trend due to a group of individual investors facing difficulties in balancing their cash flow amidst rising interest rates."
"Individual investors buying apartments and using financial leverage are under pressure as bank interest rates soar, forcing them to consider selling off some of their investment portfolios. This has led to a slight increase in the supply of secondary apartments in major cities recently," Ms. Dung said.
Will secondary market apartment prices increase?
Troy Griffiths, Deputy Managing Director of Savills Vietnam, assessed that the current apartment market is unique in that there is virtually no primary supply, meaning there is no new housing supply for homebuyers with genuine housing needs.
"This forces them to seek supply from the secondary market. Since the beginning of the year, the secondary apartment market has been heating up in both Ho Chi Minh City and Hanoi," a Savills expert emphasized.
According to Savills experts, there is currently a surge in secondary market prices across Ho Chi Minh City, reaching over 5%, especially in districts like Tan Binh and District 11. Only in the remaining nine districts are secondary market apartment prices trending downwards.
According to Savills experts, there is currently a secondary market price surge across Ho Chi Minh City. (Photo: MP)
Troy Griffiths also pointed out a notable aspect of the secondary market: the legal certainty of the products. The majority of projects have already been granted land use rights certificates. In contrast, in the primary market, we see quite a few projects facing obstacles related to this issue.
However, according to Savills experts, the secondary market is also highly dependent on future interest rate adjustments.
"With bank loan interest rates reaching 14-15%, this is quite high, forcing homebuyers to consider carefully. However, if interest rates can return to pre-COVID-19 levels of around 10-12%, this market will become more attractive and liquidity will increase," the analyst said.
Mr. Troy predicts that the secondary market will be very interesting over the next 12 months. After this period, the situation of limited new supply will change thanks to more new projects being launched. At that point, secondary prices may return to a more stable state.
According to Savills Research, Ho Chi Minh City is expected to have an additional 9,000 new apartments from now until the end of the year, with Class B apartments accounting for 71%, Class C apartments 23%, and Class A apartments 6%.
By 2026, 137,540 units from 186 projects will be available for sale. Although some projects are not yet rated, developers are showing interest in affordable products to meet demand.
In Hanoi, 9,400 apartments will be handed over in 2023, and 7,000 new units are expected to be launched, with Class B apartments accounting for 83% of the supply. From 2024 onwards, this market is expected to have approximately 86,500 new apartments from 98 projects, with Class B apartments accounting for the majority, representing 60% of the market share.
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