After apartments, what type of real estate will drive investment in the coming period?

Apartment buildings are still leading the market.

Along with the stable growth of the economy , the real estate market in the second quarter of 2024 continued to record positive signs with a sharp increase in new supply and transaction volume, respectively 3 times and 2.4 times higher than the previous quarter.

Specifically, research data from the Vietnam Association of Real Estate Brokers (VARS) shows that in the past quarter, the primary housing supply reached approximately 27,335 units, with about 19,747 new units offered for sale. Overall, the market recorded 14,400 successful transactions. The strong increase in transactions was due to improved supply quality and demand, mainly focused on apartment projects. Market demand, including investment demand, increased by about 30% compared to the previous quarter, and real demand also improved as confidence in the market gradually recovered.

VARS also noted that, to date, apartment units remain the dominant segment driving market liquidity. More than 70% of the supply and 75% of transactions in the primary real estate market in Q2 2024 were contributed by the apartment segment. Newly launched apartment projects, particularly those priced above 50 million VND/m2, concentrated in Hanoi , recorded very good absorption rates, reaching up to 90% shortly after their official launch, despite continuously rising primary market prices.

Apartment prices continue to maintain an upward trend, with the highest growth rate in Hanoi. From mid-to-late 2023, the price growth of the Hanoi apartment market began to increase and surpassed that of the Ho Chi Minh City market. As of Q2/2024, the average primary apartment price in Hanoi nearly reached VND 60 million/m2. Compared to 2019, Hanoi's primary apartment prices recorded an increase of over 58%, more than double the increase rate (27%) of the Ho Chi Minh City market.

After apartment buildings, which type of real estate will attract investment in the coming period? (Figure 1)

Furthermore, apartment prices in Da Nang have also started to rise again, with the rate of increase in Q2/2024 surpassing that of Ho Chi Minh City. However, the average selling price of apartments here is still lower than in the two special urban areas.

VARS believes that primary market apartment prices will remain difficult to reduce, especially given the overwhelming supply of high-end apartments. This is coupled with rising construction costs and increasingly higher quality of living spaces and amenities. Land for commercial housing development in the city center and surrounding areas will continue to be developed by investors in the apartment segment, catering to both investment and actual housing needs of wealthy individuals. Meanwhile, middle and low-income individuals will continue to rely on social housing to own homes. However, this segment will be limited within a 30km radius of the city center.

However, according to this unit, in the context of a real estate market that has not fully recovered and supply remains scarce, the apartment segment will continue to be an attractive and low-risk option for investors. The fluctuations of previous solutions serve as a valuable lesson for new investors, as well as seasoned investors, leading them to set stricter requirements when buying property for investment, especially when using financial leverage.

The flow of money is likely to change direction.

According to VARS, after carefully considering microeconomic factors, capital flows will gradually shift towards other types of investments that possess advantages such as location, development potential, and sound legal standing.

Location is the most important factor in real estate investment, determining the value and potential for price appreciation of the property. This includes properties located in central areas, in localities with strong economic growth, closely linked to industrial, commercial, and service sectors; with convenient transportation systems, and close to amenities such as schools, hospitals, shopping centers, and entertainment areas.

Furthermore, properties in areas with effective development and planning, attractive investment policies, and integrated transportation infrastructure will have clear potential for price appreciation. However, it is necessary to thoroughly research the future development plans of that area.

Finally, having a land use certificate or other legal land ownership documents is also an important factor. Alternatively, the property should be developed by reputable investors, have a comprehensive and modern infrastructure and amenities system, or offer high-end services and a focus on an elite residential community.

After apartment buildings, which type of real estate will attract investment in the coming period? (Figure 2) — Investment flows into real estate are predicted to potentially shift direction.

VARS believes that the real estate market will certainly need time to fully absorb the content of the new laws. Along with that, real estate projects need time to resolve obstacles caused by the law taking effect 5 months earlier than the previous decision, and to complete procedures, restart, and resume implementation before introducing new supply to the market. Therefore, in addition to the apartment segment, in the short term, capital will gradually shift towards products that are "ready" for transaction and possess outstanding features.

Firstly, there are low-rise properties from reputable developers that are ready for handover or have already been handed over, and have a strong presence in the secondary market. Next, we cannot ignore land plots – the "king of investment channels" with attractive returns. Subdivided land plots in developing areas linked to industry, commerce, and services, with complete infrastructure and relatively low prices, will continue to be sought after by investors.

The most attractive option is auctioned land in urban and residential areas, as it is a clean investment, free from disputes and lawsuits, not subject to encroachment, and not currently leased out. Importantly, it comes with a land title and existing infrastructure. Investors can easily build houses on these plots for rent, generating a steady stream of monthly income.

In fact, recently, local authorities have been organizing more land auctions in new urban and residential areas compared to the same period last year. Land auction activities have been vibrant in some aspects, with a surge in the number of applications and successful bids ranging from 20% to 10 times higher than the starting price.

In the future, it is certain that money will continue to flow into land auctions as more auction sessions are organized to generate budget revenue.

"The right investment not only helps investors preserve assets, generate profits, and create added value for society, but also helps the real estate market develop more healthily and efficiently in the long term, instead of just land products with various price ranges," VARS stated.

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