Housing market has bottomed, but supply low: analysts

Both the Hanoi and Ho Chi Minh City primary markets saw over 100% absorption rates, a report published by VNDirect Securities Corporation said.

In its forecast for 2024 real estate firm Jones Lang LaSalle Vietnam (JLL) also said the housing market is "on the way to recovery."

In HCMC, real estate services generated revenues of VND42.3 trillion (US$1.72 billion) in the first two months of this year, up 20.1% year-on-year, according to the HCMC Statistics Office.

This jump in revenues, albeit from a low base after sliding 13% last year, is a positive sign for the market.

However, while demand has recovered, the market is running low on supply, especially of affordable housing.

This year supply of townhouses in the primary market in Hanoi and HCMC has dropped to a 10-year low of 754 and 766, according to real estate consultancy Savills.

New apartment supply has also slid to low levels of 7,722 units in HCMC and 19,808 in Hanoi, it said.

Alex Crane, CEO of real estate consultancy Knight Frank Vietnam, said the low supply is because many developers have moved new project launches to 2025 and 2026.

Do Thu Hang, senior director of research and consulting at Savills Hanoi, said declining supply, combined with rising land and construction costs, has driven up housing prices.

The average apartment price in Hanoi jumped by 15% in 2023 to VND53.2 million per square meter.

Some apartment projects in HCMC have increased prices by 3-6% in the first two months of 2024.

While the government plans to build one million social housing units between 2021 and 2030, only 4.7% of that target had been achieved as of last year, according to VNDIRECT.

Looking towards the rest of 2024, the securities firm forecast housing demand to increase as the average mortgage interest rate has slid from 13-14% a year to 11% at commercial banks and developers are expected to offer easy payment policies to spur demand.

But the market is unlikely to see much improvement in supply.

JLL said housing supply would stay low this year, with Hanoi and HCMC only adding 10,000 new units each.

Real estate plays a crucial role in Vietnam's economy. Last year it accounted for 27.3% of GDP and 21% of banking credit, according to VNDirect.