Affordable apartments grow increasingly out of reach for Hanoians

He wants to sell it and move to a larger one, but buying an apartment could cost him half again as his sale price.

The ride-hailing driver recently put his 45-square-meter apartment in Thanh Tri District’s Dai Thanh urban area for sale for VND1.3 billion (US$52,500), or around VND29 million per square meter.

He had noticed nearby apartments fetching their owners high prices and asked a real estate agent about his.

He was surprised to find out that the cheap apartment he had bought for VND850 million had appreciated by 50%.

However, a larger unit with an area of 65 square meters within the same building as his now costs over VND2 billion, or VND31.7 million per square meter.

"I am happy that my apartment’s value is rising, but not so much now that I have to move to another unit whose price has also increased," he says.

Chi, an office worker in Hoang Mai District, began searching for a new house late last year with savings of around VND1 billion.

Late last year her family moved from the mini apartment they had been renting for three years to a 56-square-meter apartment in the Linh Dam urban area also in Hoang Mai.

The apartment cost her VND1.8 billion, or VND32 million per square meter, 20% higher than six months ago, she says.

"Affordable apartments are becoming increasingly rare as their prices have doubled since handover, but I bought one anyway because I needed a safer living environment."

Many apartment buildings originally considered affordable at VND10-15 million per square meter a decade ago have experienced a relentless increase in price in recent years.

Built by the same company as the Dai Thanh and Linh Dam urban areas, apartments in the CT11 Kim Van - Kim Lu project in Hoang Mai District were sold in 2013 for less than VND14 million per square meter.

They now cost at least VND30 million per square meter.

Xuan Mai Tower in Ha Dong District, launched at VND14-18 million per square meter in 2012, now costs a minimum of VND32 million for a unit.

Recent data from real estate trading platform Batdongsan shows that the average selling price of Hanoi apartments increased by 17% year-on-year in the first two months of 2024.

Dai Thanh and Xa La, both affordable projects, saw some of the biggest price surges in the market of 27% and 23%.

High demand for affordable housing and low supply have made old apartments in Hanoi significantly more expensive, Pham Duc Toan, CEO of real estate agency EZ Property, says.

Even affordable apartments that are over a decade old and showing clear signs of deterioration have seen their prices increase by 12-15%.

Of the various real estate segments, affordable apartments saw the most noticeable increases due to their low initial base prices, Toan says.

Being the cheapest option for the working class, this segment has also seen a large number of transactions and garnered much interest over the years, he adds.

Nguyen Chi Thanh, permanent vice chairman of the Vietnam Association of Realtors, says the demand for old apartments is partially fueled by herd mentality.

Many people, seeing old apartments being bought at high prices, believe their prices will continue to rise, and rush to buy them regardless of their condition and unwittingly contribute to the rapid price rise, he says.

Experts warn that such a prolonged uptrend in prices will distort the housing market and reduce opportunities for low- and middle-income people to own homes.

Experts say people buying old apartments should thoroughly assess an apartment’s infrastructure and safety.

Buyers could think they are getting a bargain by buying a deteriorating unit but will end up spending more on renovation and maintenance in the long run, they warn.