HCMC housing industry insiders do not expect prices to fall this year

After searching for three months Hoang finally found his dream apartment, a 65-square-meter two-bedroom unit in Nha Be District listed at VND3.6 billion (US$143,500).

The owner was firm on the price and only agreed to a VND10 million discount after lengthy negotiations.

"Price reductions are rare even for apartments with incomplete paperwork, let alone one that has completed all the legal procedures like the one I bought," Hoang said.

Eager to bid farewell to years of monthly rent payments and enticed by low mortgage interest rates, Hoang decided to borrow VND1.4 billion to seal the deal.

Vy set her sights on a VND5-billion house built on a 55-square-meter plot in an alley that can only be accessed by motorbike on Binh Thanh District’s Nguyen Huu Canh Street.

She said: "Mortgage rates are low and so I decided to take a chance since I have been looking for a house for two years. With the money I have, I can only buy a small house in an alley."

While the HCMC real estate market has not experienced dramatic price surges like in Hanoi, its prices have remained at a relatively high level, according to market research firms and real estate companies.

Property consultancy CBRE said the average price of new apartments in HCMC was VND61 million per square meter in the first quarter of this year, unchanged from the previous one.

The average townhouse price on the primary market rose 6.7% from the last quarter to VND408.65 million per square meter, according to real estate firm Jones Lang LaSalle.

It was up 0.4% on the secondary market, it added.

Only 633 were new units put on sale within the period, marking a 78% decrease from the previous quarter and a 61% year-on-year decline, according to real estate consultancy Savills.

The apartments were all high-end with prices at above VND125 million per square meter in some projects, it added.

Looking ahead to the remainder of 2024, experts said supply constraints would persist, driving up prices.

CBRE expected apartment prices in HCMC to rise by 3% and around 8,000 new apartments to be launched, and townhouses by 4%.

Savills said 1,150 new townhouses and villas would be added to the market in the next nine months, a majority of them priced above VND20 billion.

The lack of affordable housing is unsurprising as the segment is deemed unappealing by developers, Savills said.

"The land available for residential development in both cities [HCMC and Hanoi] is shrinking and therefore more expensive, meaning developers have to hike their prices," Do Thi Thu Giang, director of advisory at the company, said.

Besides, developers often choose to invest in additional amenities after acquiring land to increase prices from low-end to either the mid-priced or premium segment to maximize profits.

The growth in population and resultant jump in housing demand make it difficult to bring housing prices down, experts said.

Savills said the housing demand in HCMC, which is around 50,000 units per year, has not been met for years.

Giang said: "For nearly five years housing supply in HCMC has fallen far short of meeting even half the annual demand. Given the high demand and low supply, the uptrend in housing prices is inevitable."

While plans are underway to launch more social housing projects in the next two years, experts pointed out that this might not lower housing prices since not everyone would have access to them.

To address HCMC’s housing shortage, experts call for developing transportation infrastructure to reduce the commute time to the city center.

This would help access cheaper housing on the outskirts or even neighboring provinces, according to Savills.

HCMC has the opportunity to implement the transit-oriented development (TOD) model once its metro is ready, Giang said.

The TOD model uses public transportation as a basis for urban and traffic development to form population concentration points.

It maximizes the utilization of space around metro stations and enhances the value of these areas.

This approach would facilitate large-scale development and high-density housing along the metro transit lines, making commuting from suburban areas more efficient, Giang added.