• In H1/2024, while apartment demand surged, driving significant price increases, the villa and townhouse segments faced a slower recovery, with new supply entering the market but ongoing challenges in pricing and liquidity.
• Following the implementation of the Real Estate Law in August, the market is expected to see positive adjustments alongside a continued shift towards suburban areas.

Apartment Segment is Experiencing a Supply Shortage

In the first half of 2024, the housing segments remained a focal point of the real estate sector market. The apartment segment witnessed a surge in demand, resulting in a substantial increase in secondary market prices. Ms Do Thi Thu Hang, Senior Director of Research and Consultancy at Savills Ha Noi, stated, “Compared to the same period last year, secondary apartment prices have risen by 25%, with Grade B and Grade C segments seeing increases of 27% to 29%.”

Savills Viet Nam's Q2/2024 report further highlighted that since 2020, primary prices have grown by an average of 18% annually, while secondary prices have increased by 14% annually. By mid-2024, primary apartment prices reached VND 65 million per m², reflecting a 10% quarterly rise and a 24% annual increase. Notably, no new supplies are under VND 45 million per m² in Q2/2024.

Limited supply and product imbalance are seen as the main reasons for the continuous sharp increase in apartment prices. In Q2/2024, the new supply decreased by 34% quarterly and 25% annually, with 2,697 units. Primary supply reached 10,317 units, down 20% quarterly and 49% annually.  

Most apartment transactions recorded in H1/2024 belonged to the Grade B segment, thanks to prices matching most buyers' financial capabilities. Grade B accounted for 96% of the 5,085 units sold. This segment provides quality services that meet daily living needs, helping buyers balance the cost of homeownership with the quality of life.

Villa and Townhouse Segment Shows Slow Recovery

The villa/townhouse segment exhibited slow recovery signals. In the first half of the year, the number of transactions in this segment decreased by 40% quarterly, though up 5% annually, reaching 111 units. The quarterly absorption rate was only 18%. The new supply absorption rate reached 48%, down 15 % points quarterly and 3 % points annually.

Most primary transactions were recorded in Ha Dong District, accounting for 61%, due to infrastructure projects nearing completion, such as Le Quang Dao Road, which is expected to be operational in Q4/2024. Hoang Mai District and Thuong Tin District followed with 14% and 9%, respectively.

Ms Hang explained, “The villa/townhouse segment in ongoing projects has yet to recover. Prices are rising, but liquidity remains weak. Meanwhile, neighbouring markets still have a new supply with competitive prices, attracting more demand.”

Specifically, the supply of villas in new projects remains abundant. According to Savills report, the new supply reached 128 units, up 38% quarterly but down 2% annually. The new supply came from two existing projects in Ha Dong: An Quy Villa, with 54 villas; An Lac Green Symphony in Hoai Duc, with 12 new townhouses; and Him Lam Thuong Tin, with 11 new shophouses.

Primary supply reached 608 units from 16 projects, down 9% quarterly and 24% annually. Villas dominated, accounting for 39% of the primary supply due to new supply in this quarter.

Along with abundant supply, villas and townhouses are currently maintaining high prices. In the first half of the year, primary villa prices in projects increased by 9%, reaching VND 178 million per square meter of land. Townhouse prices decreased by 2% quarterly to VND 188 million per square meter, mainly because higher-priced units had already been sold, leaving lower-priced ones. 

Shophouse prices increased by 3% quarterly, reaching VND 288 million per square meter of land. Retailers and family-owned businesses must ensure legal conditions, such as fire safety approvals and total usable area at each level, to ensure the properties are ready for operation. These factors directly affect the current occupancy rates of shophouses.

Housing Market Outlook in the Coming Period

According to Ms Hang, the Ha Noi housing market is expected to enter a "new cycle" as three Real Estate Laws, including the Land Law, Housing Law, and Real Estate Business Law, took effect early on August 1. "With the early implementation of the laws, many market issues will be addressed, and the impacts will occur more quickly—for example, the supply constraints in many areas. When supply is limited, people's choices decrease, leading to unstable and rising prices. Addressing supply issues will positively impact as the laws come into effect."

However, it should be noted that although the laws are effective early, resolving supply constraints will take time as many projects still await guiding documents. Therefore, significant changes cannot be expected in the short term, as the laws aim to address long-term issues and ensure sustainable market development.

Housing prices remain high, significantly affecting investment decisions and market liquidity. As guiding documents are gradually issued, prices are expected to stabilise, and buyers’ interests, such as conditions and regulations regarding the sale of future projects, will be maintained. Previously unapproved projects had a basis for resolution, and other issues, including land use fees, land leasing, and social housing development, can be addressed.

The early passage of the law will also provide timely support to the market, positively influencing the sentiment of buyers and investors and helping them to be more confident in their decisions and business development plans in the coming period. 

For instance, the Real Estate Business Law stipulates that developers can only collect a deposit of no more than 5% of the property's value. Additionally, deposits can only be collected when the house or building has met all the conditions for sale as regulated by the 2023 Real Estate Business Law. This helps protect buyers from the risk of capital being appropriated before completing the necessary legal procedures, allowing buyers more time to prepare financially. At the same time, this regulation helps boost confidence in market transactions.

Moreover, with limited land funds, projects, and supply in central areas, the trend of shifting to suburban areas will continue to grow, impacting both apartment and villa/townhouse segments.

Demand for apartments mainly comes from the middle-income group. This group's affordability is for products under VND 3 billion, while Ha Noi's market offers few options at this price point. As a result, buyers have considered projects in suburban areas such as Nam Tu Liem, Ha Dong, and Gia Lam, which provide 93% of the segment's supply.

Similarly, for villas/townhouses, by the end of 2024, 13 projects will provide 2,951 units, most of which will be in Dong Anh District, accounting for 34% of future supply. Ha Dong District follows with 19%, and Hoai Duc District with 16%.

Commenting on this trend, Ms Hang explained, "In this context, the city is forced to invest in developing ring road infrastructure and radial routes to ease congestion in the inner city and relocate residents to suburban areas. New urban areas in outlying ares are being invested in with synchronised, high-quality amenities. The increasing number of transactions shows that people are more open to relocating to these areas. Demand also comes from those who can work remotely and do not need to commute much but still want synchronised amenities and good landscape infrastructure." 

According to the Ha Noi Department of Transport, 11 transportation infrastructure projects are expected to start construction in Ha Noi. 13 central ministries and agencies will be relocated outside the inner city, concentrating in Tay Ho Tay and Me Tri..