HCM City real estate market: apartment prices on the rise
Real estate is still considered a safe investment channel for medium and long term investors.
According to CBRE Vietnam, 15,500 new apartments were provided in Q2 2022, which was higher than the total supply of the whole year 2021. Eighty eight percent of new supplies were in the eastern part of the city.
High-end apartments, priced at $2,000-4,000 per sq m, are dominating the market, accounting for 93 percent of new supply. The supply of mid-end apartments was small while affordable apartments were unavailable.
However, mid-end apartments, which satisfy the needs of most people who buy for accommodation rather than for investment and other purposes, are the most popular products, accounting for 41 percent of total supply in the city.
A survey by CBRE Vietnam found that the average primary selling price in the market was $2,455 per sq m, increasing by 2.7 percent QoQ and 8.6 percent YoY. The mid-end market segment enjoyed benefits from price increases in non-central areas with a 1.9 percent QoQ and 7 percent YoY.
Meanwhile, the high-end segment saw a decrease of 3.8 percent.
It is expected that the city will have 22,000 apartments this year, with high-end and luxury segments leading the market. The average primary selling price is predicted to see slow growth.
The supply of mid-end and affordable apartments from now to the end of the year will continue to come from surrounding areas such as Binh Duong, Dong Nai and Long An provinces.
According to Duong Thuy Dung, CEO of CBRE Vietnam, investors’ mindset changed after the pandemic. Products need to be green and environmentally friendly to satisfy the needs of buyers.
She predicted that areas near the city are expected to develop rapidly because of new infrastructure and price increases in HCM City.
In its newly released report about the housing market in the city and surrounding areas in H1, DKRA Vietnam said apartments increased by 96 percent compared with the same period last year. The city led the market which accounted for 75.6 percent of supply and 80 percent of consumption.
Secondary selling prices fall
Despite positive signals in H1, the apartment market has been facing serious difficulties caused by changes in laws and policies and banks’ tightening of lending.
Vo Hong Thang, deputy CEO of DKRA Vietnam, said the new apartment supply may decrease from now to the end of the year, with 9,000-11,000 apartments, just 70 percent of H1.
The new supply in Binh Duong will be maintained at 3,000-4,000 apartments, while Long An will have about 300 apartments, and other cities and provinces will see a shortage.
“The general demand and market liquidity may continue to be affected if banks continue to tighten real estate credit,” he said.
“As costs have increased, especially expenses on materials, the primary selling price may increase in the time to come, while secondary prices will not see big changes,” he said.
The problems in the HCM City market and surrounding areas have led to higher primary selling prices but lower secondary prices.
Dinh The Hien, a respected economist, said that in 2020-2021, the economy declined because of Covid-19, but real estate prices still increased sharply.
This was attributed to commercial banks’ capital with low interest rates flowing into the market; a supply shortage; and increased construction costs and infrastructure development in some areas.
The prices also increased during these years because investors poured money into real estate. They believed that land prices would increase and the dong might be devalued because of inflation.
In the city, housing prices soared because of short supply as a series of projects were inspected and it took much more time to follow administrative procedures.
Regarding secondary selling prices, Hien said there were declines in some projects when the grace period program ended, and in projects with low liquidity.
“High inflation and interest rates will directly affect the solvency of the buyers who use financial leverage. Some investors are willing to accept lower profits and sell products at prices lower than expectations. However, this can be seen only in certain areas,” Hien said.