With a selling price of over 130 million VND/m2, villas and townhouses in Hanoi are 'unsold'

According to Savills report, in the fourth quarter of 2022, there were 15 projects opening for sale in the villa and townhouse segment, with 926 units. This is the lowest level in the past 5 years.

According to Savills, one of the main reasons for the decline in supply is believed to be legal difficulties in the real estate sector, which has made it difficult for investors to implement new projects. The number of transactions is also considered to have hit a five-year “low”, with only 196 transactions recorded, down 52% compared to the same period last year.

To stimulate the market, investors have proactively reduced the selling price of this segment. Of which, the primary price of villas decreased by 6%, down to 130 million VND/m2, the price of townhouses decreased by 1% to 172 million VND/m2. The shophouse segment had the most obvious change, down 10%, equivalent to 189 million VND/m2.

With a selling price of over 130 million VND per square meter, villas and townhouses in Hanoi are shown in picture 1. — Villas and townhouses in Hanoi have been decreasing slightly in recent times, but are still at a very high level. (Photo: DT)

For the secondary market, 2022 witnessed a large year-on-year price increase, mainly in inner-city districts with limited land funds, accompanied by buyer confidence in the first half of the year. However, in the fourth quarter of 2022, the secondary market had its first quarterly price decrease since 2019, while shophouse prices continued to decrease from the third quarter of 2022.

Ms. Do Thu Hang, Senior Director, Research and Consulting, Savills Hanoi, said that villa and townhouse prices have tended to decrease slightly in the last quarter of 2022, but the price adjustment will not be significant and this is also a challenging problem for both investors and individual investors.

According to Ms. Hang, the general price level of townhouses in the Hanoi market is still high. Villas in Hanoi with prices from 10 to 30 billion VND account for 55% of the proportion, while prices above 30 billion VND also account for 20% of the proportion, and prices below 10 billion VND also account for about 22%.

For current investors, the initial investment costs of investors are also higher. These costs include land costs, capital costs, and financial costs during project development due to problems that arise that cause costs to be higher than expected.

For example, the story of the lengthy process of licensing and project approval causes investment costs to increase, thereby affecting product prices.

“In addition, in the secondary market, investors have also gone through many buying and selling transactions, causing prices to be pushed up to high levels, leading to difficulties in making decisions on price adjustments,” the analyst said.

Furthermore, for villas and townhouses, demand for this segment is still recorded at a high level but supply is limited. Demand also comes from high-income people, buying with a certain amount of idle money to invest in low-rise housing and using little bank financial leverage.

Therefore, there is no selling pressure in the context of high bank interest rates. This leads to the reason why the price decrease in this segment will not be completely obvious.

Ms. Hang commented that in 2023, liquidity may improve but will focus more on products bought for living instead of buying for investment. Hanoi will need good quality projects at reasonable prices when the existing supply is at high prices and not attractive to buyers, especially when the market is facing competition from neighboring provinces such as Hung Yen and Bac Ninh with developing infrastructure and rapid urbanization.

In other cases, to solve liquidity difficulties, many investors have begun to transfer projects, causing mergers and acquisitions (M&A) activities to take place very bustlingly. For investors with high determination and reasonable negotiation skills, this is one of the options to help purify the market.

The purification will help the market have reputable, experienced, financially capable investors, and overcome existing problems, such as bringing unsuitable products to the market, raising prices but the products do not meet the needs of users.

In terms of prospects, the market will have a supply of 1,600 units from 15 projects expected to enter the market in 2023.

Hoai Duc district is expected to provide 20% of future supply, followed by Thanh Tri district with 16% and Long Bien district with 15%.

Mr. Matthew Powell, Director of Savills Hanoi, commented: New infrastructure projects will boost the housing market. When completed, projects such as Ring Road 3.5 and Ring Road 4 will support the development of more than 80 projects with more than 2,900 hectares in districts adjacent to the Ring Roads such as Hoai Duc, Me Linh, Ha Dong, Dan Phuong, Thuong Tin.

“In addition, support policies and difficulties will promote market recovery in 2023,” Savills experts emphasized.

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