HCMC high-end apartment segment in utter slump despite falling prices

With no new supply in the last quarter, only 39 of the 1693 new units remaining from the first three quarters were sold for a 2.3% absorption rate, according to real estate firm Jones Lang LaSalle Vietnam (JLL).

In the third quarter of 2023, 2,500 of 3,600 new units were sold for a 55% absorption rate, according to real estate agency CBRE Vietnam’s report.

Supply fell as cautious developers, seeing little demand in the market, postponed new projects to 2024.

In the last quarter of 2023 the average price of new projects in the segment slid by 12.7% year-on-year to VND120 million (US$5,087) per square meter, according to JLL.

But it was up 1.4% in the secondary market, though mostly for newly completed projects in good locations.

Trinh Thi Kim Lien, CCO of Dat Xanh Services, explained that the low absorption rate for high-end apartments was due to a mismatch between supply and demand as the majority of buyers in the real estate market were looking for low-priced apartments.

Premium units accounted for 66.4% of new housing supply while mid-priced units accounted for the remainder and zero new affordable projects were launched, said Le Hoang Chau, president of the HCMC Real Estate Association.

This resulted in an oversupply of premium units and a severe lack of cheap apartments, he said.

Most prospective buyers are looking for apartments priced at less than VND2.5 billion, but many developers focus solely on high-cost premium apartments, he said.

Trang Le, head of research and consulting at JLL, said this year HCMC might see 4,900 new units in the high-end segment, but demand is expected to remain concentrated in the affordable segment.

"Since revised laws will only take effect in 2025, there will not be any significant market developments, and so investors and buyers should be cautious.

"Prices might see some adjustments but this is dependent on new supply and market sentiment."

Pham Anh Khoi, chief economist at Dat Xanh Services, said housing priced at below VND2.5 billion would see the most demand in 2024 and should be the focus of developers.

Small and affordable housing units for single people, Gen Z-ers and single-generation families would also be in demand this year, he added.