A recent survey by Savills found that the gap of property prices in Hanoi, Vietnam is narrowing between urban and surrounding areas as more facilities are offered to compensate for outer locations.
The survey also said that property price and size are the key buying influences.
For some apartment projects in the My Dinh area, the price has increased to 50-60 million dong ($2,100-$2,550) per sqm.
Savills reported average primary prices in the third quarter of this year on the Hanoi apartment market moved up three per cent quarter-on-quarter and 10 per cent year-on-year to $1,500 per sqm. Secondary prices have been more affected by the pandemic and were down one per cent quarter-on-quarter to $1,157 sqm.
The company said abundant planned infrastructure supports the long term outlook with house prices set to benefit. From 2016 to date, primary prices have increased five per cent per annum. As networks improve, supply will increasingly move to newer and further out areas.
Savills advisory services and research director Do Thu Hang said: “The market remains price sensitive and uncertain with a lack of Grade A apartment supply.
“There is robust demand for affordable products. Sustained recovery underpinned by long term economic and population growth is anticipated once Covid-19 is under control.”
She said that besides foreign investors, the Hanoi market is attracting domestic investors, especially from Ho Chi Minh City (HCMC).
There are some reasons for those investors coming to the Hanoi market. Firstly, investors are reassured by the legal framework.
Second, HCMC-based and foreign investors want to bring a new development trend to Hanoi’s housing market, which will create direct competition with local investors. These investors are all developers with extensive experience in real estate development, Hang said.
Third, the developers themselves have abilities in many aspects to create affordable products meeting investors’ expectations.
However, the biggest difficulty of investors from HCMC is to look for potential projects and cooperation opportunities with landowners in Hanoi. Therefore, they have flexible transaction structures to increase opportunities to cooperate with investors in Hanoi. For instance, they could reduce the investment ratio to 51 per cent instead of 76 per cent as before.
Hang said: “The success of investors from HCMC in Hanoi is still a big question.”
Customer psychology is one of the major challenges for the property investors from HCMC because they may not understand the market demand. In HCMC, prices of projects in the city centre can be up to $10,000 per sqm and even higher. However, Hanoi has few property products with that price and it is difficult to sell them.
Therefore, despite having a lot of experience in residential real estate development, understanding the Hanoi market is a challenge for developers, she said.
According to the Savills report on the Hanoi market in the third quarter, the apartment segment had about 3,100 units from four new launches, and the next phases of nine existing projects were down to their lowest in five years at 50 per cent quarter-on-quarter and 60 per cent year-on-year. Primary supply of 26,800 units was down eight per cent quarter-on-quarter and nine per cent year-on-year. Uncertainty is delaying project launches.
About 5,200 sales were down three per cent quarter-on-quarter and 44 per cent year-on-year. Grades B and C accounted for almost all sales. Demand has eased under a lack of new supply and high-priced inventory.
Savills forecasts that in the fourth quarter, approximately 9,980 units from one existing and 11 future projects will enter the Hanoi market, with Grade B continuing to dominate. Leading future suppliers will be Gia Lam district with 38 per cent of supply and Tu Liem with 37 per cent.
Urbanisation, strong population growth and shrinking households are all driving the solid housing demand, Savills said.
VIET NAM NEWS/ASIA NEWS NETWORK