Reasons why demand for townhouses and villas in Ho Chi Minh City is still very low

According to Nhip Song Thi Truong , the first quarter 2024 report of DKRA Group recently showed that the supply and primary consumption of townhouses and villas have shown signs of increasing compared to the same period last year but are still at a very low level in general. The increase in supply and demand was 11% and 43% respectively in the first quarter of 2024. In which, Ho Chi Minh City and Dong Nai are the main sources of supply with rates of 38.8% and 37.1% respectively.

According to this unit, transactions mainly occurred in the product group with prices below 10 billion VND/unit. Above this price, it is difficult to sell. The two areas of Binh Duong and Ho Chi Minh City led the market when accounting for more than 80% of total primary consumption in the quarter. These areas bordering Ho Chi Minh City, most of the products are priced from 3-5 billion VND/unit, so consumption increased.

DKRA pointed out that the primary price level is still high and has not fluctuated much compared to the same period in 2023, maintaining an average price of about 4.1 - 27.8 billion VND/unit. In addition, some projects have also adjusted their selling prices and sales policies to suit the actual market situation.

Real Estate - Reasons why demand for townhouses and villas in Ho Chi Minh City is still very low — The supply and primary consumption of townhouses and villas have shown signs of increasing compared to the same period last year, but in general, they are still at a very low level. Illustrative photo from the internet

In the secondary market, prices increased by an average of 2% - 4% compared to the end of 2023, liquidity improved, and transactions occurred mainly in projects with completed infrastructure and legal procedures...

Savills Vietnam's report also shows that the segment of townhouses and villas in urban areas in Ho Chi Minh City continues to slow down. The reason is that the current products all have quite high prices. The supply of prices above 30 billion VND/unit accounts for the majority of the product basket, accounting for 76% of the market share.

Along with that, limited supply, buyers have few choices. Supply is limited due to legal and financial challenges. This also promotes the shift of demand to neighboring provinces thanks to improving infrastructure and more reasonable prices.

According to Savills, in Q1/2024, new supply was limited to only 42 units, up 56% quarter-on-quarter but down 11% year-on-year. New supply came from a single project launched, Dong Tang Long – Hung Gia, with a price of about VND10/unit.

The representative of this unit said that the supply of townhouses and villas in the past three years has been quite limited, mainly due to legal barriers, leading to the stagnation of new projects. The primary supply reached 762 units, remaining stable on a quarterly basis but improving 13% on a yearly basis.

According to experts, compared to 2023, transactions have shown positive signs, but this figure is still quite modest. The amount of poorly absorbed inventory reached only 13% due to high prices and large unit sizes. Primary selling prices decreased by 13% QoQ but increased by 17% YoY, due to new low-cost products and large discounts applied by investors to boost sales.

In the remaining 9 months of 2024, according to Savills, future supply is expected to reach 1,149 units, mainly coming from the next phases of existing projects. New projects account for only 34% with notable projects such as Foresta, The Meadow and L'Arcade. The majority of future supply will be townhouses and the price segment will be products above 20 billion VND/unit. By 2026, future supply is expected to reach 4,845 units.

According to Dau Tu newspaper , talking about the decline in prices of villas and townhouses, Mr. Vo Hong Thang, Director of the research and development department of DKRA Group, said that many investors who borrowed from banks at a large rate, could not hold on any longer, and accepted the reality that real estate would find it difficult to grow again in the short term. In cases where finances do not allow, choosing to deeply reduce prices to cut losses is the best direction for many people.

“Investors who want to benefit from a market recovery must be prepared to wait for years. The higher the value of the product, the harder it is to sell. In the most positive case, the decline will last until the second half of 2024 or even last the rest of the year,” Thang said.

Dao Vu (T/h)

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