Property sector suffering three plagues

By Ngoc Diem   February 16, 2024 | 11:00 pm PT
Property sector suffering three plagues
Apartment buildings in Hanoi's Cau Giay District. Photo by VnExpress/Ngoc Thanh
A shortage of affordable property, poorly-placed social housing and rising high prices are lingering as the three largest problems Vietnam’s property market is set to face throughout this year.

No affordable property

For every 100 apartments sold in Hanoi last year, only three cost less than VND2 billion ($81,566), according to data from property consultancy Savills Vietnam.

Most projects launched last year were in the middle or high-end price segments.

High-end units accounted for 75% of new apartment supply in Hanoi last year, while the figure was 84% in Ho Chi Minh City.

A recent survey of 1,000 VnExpress readers showed that half of them had put off buying a home this year because prices were too high.

There is large demand for apartments for VND2 billion or lower, as 41% of respondents said they had enough money to such apartments.

Nguyen Van Dinh, chairman of the Vietnam Association of Realtors, said affordable apartments had accounted for 30% of new supply in 2019, but the figure is now at only 6%.

Affordable price tags of VND25 million per square meter can only be found outside the city or at social housing projects.

Social housing conundrum

Amid a shortage of affordable homes, many people have turned to social housing in hopes of fulfilling their dreams of becoming homeowners in Vietnam’s largest cities.

Last year, 1,300 people had to draw lots for the rights to buy 149 social housing units at a project in Hanoi’s Nam Tu Liem District, where prices start at VND19.5 million per square meter, an unusually-low rate in the capital.

While some social housing projects are sold out, others have seen few inquiries. In Hanoi’s outskirt district of Hoai Duc, at least one project still has vacancies after 9 years on the market.

In the neighboring province of Bac Ninh, where many factories are located, only 350 social housing apartments were sold last year and there are still 1,300 units unoccupied.

Pham Thanh Tuan, a property analyst, said that the location of a social housing project determine its occupancy. As many prime locations are occupied by luxury projects, social housing buildings are often placed in unpopular and under-developed areas and therefore struggle to sell.

Nguyen Hoang Nam, CEO of property firm G-Home, said that many people queued up to buy into the aforementioned social housing project in Hanoi only because it was a rare location in one of the city’s central districts.

Inflated prices

Homebuyers have been hoping for a drop in property prices, something the happened in 2008-2009, but which not happened in recent years.

Hanoi’s average apartment price rose 27% to VND56 million per square meter in the last quarter, while HCMC’s average apartment price went up 9% from the third quarter last year to $142 million.

Nguyen Quoc Anh, deputy director of property listing platform Batdongsan, said that prices will likely remain high this year due to the lack of new supply.

The costs of land and construction material remain high while loan interests have yet to drop substantially enough, and developers are still focusing on new high-end segment projects for high profits, he added.

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