Speculators’ tactic inflates Hanoi old apartment prices: experts

Dai of Cau Giay District started investing in the secondary market in mid-2022 when prices were declining.

He bought three cheap apartments in the Linh Dam Urban Area for VND28-30 million (US$1,118-1,195) per square meter.

He renovated and refurnished them, and sold two 75-square-meter units for VND38-39 million, making a profit of 30-35%.

Though he kept getting inquiries for the remaining 87-sq-m apartment, he decided to wait for prices to rise.

And he was not waiting passively.

"I did not settle on a price, but rather relisted it [the apartment] at a higher price several times to gauge how much I can push it up," he said.

Aiming for a 50% profit margin, Dat initially listed it at VND3.7 billion and then hiked it to VND3.8 billion.

The broker he hired to sell the unit would increase the price by an additional VND100-200 million when advertising it, he said.

"If I keep the apartment until next year, the price could climb even higher."

Recently many sellers on the secondary market have been changing their listing prices constantly, the director of an apartment trading floor in Nam Tu Liem District said.

An apartment could have its price raised by tens to hundreds of millions of dong a day, he said.

Thanks to the high demand for old apartments, even units that were previously hard to sell due to incomplete paperwork are being sold now at big profits, he said.

"Most of these sellers own multiple properties and are under no pressure to sell quickly, so they want to raise prices to capitalize on the low supply and high demand."

So far this year the average price of apartments on the secondary market in Hanoi has risen by 17% year-to-year to VND36 million per square meter, according to recent data from property consultancy CBRE.

Pham Duc Toan, CEO of real estate agency EZ Property, said sellers, aided by brokers, are taking advantage of the disparity between supply and demand to push up prices, contributing to the recent spike in old apartment prices.

The southern and western parts of Hanoi have seen the biggest price jumps, he added.

Tran Minh, a real estate investment consultant, said some old apartments in the capital’s central area are 30% more expensive than a year ago, driven by speculators.

For instance, in a market with 100 properties for sale, speculators would buy and then sell 20-30 units to create an impression of great demand, he said.

Bank deposit interest rates are low, and so investors are rushing into the old apartment segment, he said.

Buyers are not completely unaware that a bubble is forming, as a recent poll by VnExpress of over 3,400 readers found: Nearly half the participants believed that Hanoi apartment prices are way higher than their actual value.

Many apartment buyers are delaying their purchases or no longer wish to buy one after prices surged this year.

Two weeks ago Huyen of Hoang Mai District was quoted VND2 billion for a 63-sq-m apartment in the local Kim Van - Kim Lu Urban Area.

It had been 25% lower when she inquired half a year ago, she said.

A week later the price jumped to VND2.2 billion for the same unit, she added.

"The chaotic pricing of old apartments makes people who want to buy one suffer," the office worker said.

Toan of EZ Property said the galloping prices have greatly affected market sentiment.

Buyers rush to buy apartments out of fear they would miss out as prices continue to rise, he explained.

Meanwhile, speculators quickly sell their units and move on to find another market to manipulate, he said.

If the situation persists, it could distort the entire housing market in Hanoi as other residential properties are often priced based on old apartment prices.

Other segments like townhouses, social housing and residential lands might follow suit, he said, warning "the uncontrolled rise ... could plunge the housing market into a crisis."