Hanoi’s apartment market surges as prices hit new heights

Apartment prices in Hanoi have surged since late last year, approaching levels similar to those in Ho Chi Minh City.

Data from OneHousing’s Market Research and Customer Insight Center shows that by the second quarter of 2024, the average price of primary market apartments across Hanoi reached approximately VND65 million ($2,600) per square meter, up 25 per cent quarter-on-quarter and 29.8 per cent year-on-year.

Among these, the western region recorded the highest prices - around VND70 million ($2,800) per square meter. Meanwhile, prices in the east averaged about VND56 million ($2,240) per square meter, lower than the market average.

This price surge, described as "abrupt growth" by Tran Quang Trung, Business Development Director of OneHousing, has pushed the overall market higher.

While apartments priced under VND50 million ($2,000) per square meter can still be found in the secondary market, new primary market options at this price point have nearly vanished, Trung said.

Trung attributed the new price levels to limited new project supply. The total supply for this year in Hanoi is forecasted at around 22,000 units, a shortfall compared to the city’s annual population growth of 160,000, according to the Hanoi Population Department.

Secondly, between 2016 and 2021, investors had numerous options, including land plots, resorts, villas, townhouses and shophouses. However, over the past year, they have primarily focused on segments that cater to real demand.

"Investors are choosing properties that generate cash flow with high liquidity, focusing on large markets to mitigate risks - apartments are a preferred choice," Trung noted.

Customer preferences have also shifted. Previously, Hanoi residents did not prioritize buying apartments for rental, investment, or living purposes, preferring land properties instead. This mindset has now changed.

Moreover, the rapid growth of Vietnam’s middle class has driven up demand for mid- to high-end housing. Developers are responding by launching projects aimed at this demographic, further pushing up apartment prices.

In the second quarter, nearly all new apartment supply - 97 per cent - came from the high-end and luxury segments. The affordable segment has vanished, and mid-end options now account for just 3 per cent of the market.

This indicates a market shift, with high-end and luxury supply dominating.

Robust transactions despite high prices

Despite the high prices, data from OneHousing indicates that both primary and secondary market transactions rose in July, particularly in the two mega-urban areas with significant supply: Vinhomes Ocean Park and Vinhomes Smart City.

At Vinhomes Ocean Park, primary market transactions accounted for 60 per cent, while at Vinhomes Smart City, they made up 90 per cent. This shows that new supply in the western region still has strong absorption, even though the new projects are predominantly in the high-end and luxury segments.

Notably, the total number of apartment transactions in the two Vinhomes projects in July grew by over 120 per cent compared to January.

Primary sales at Vinhomes Ocean Park in July increased by 58 per cent from June, driven by new projects with attractive sales policies that stimulated buyer demand.

At Vinhomes Smart City, primary market transactions rose by 13 per cent month-on-month, mainly due to new high-end and luxury supply from three projects, including Lumiere Evergreen, Lumi Hanoi and The Sola Park.

In the secondary market, Hanoi recorded approximately 3,200 transactions in July, a 35 per cent increase from the previous month.

In the west and east regions, secondary market transactions rose by 22 per cent and 39 per cent, respectively, compared to June.

The Vinhomes Ocean Park and Vinhomes Smart City projects continued to dominate, accounting for 30 per cent of Hanoi's total market transactions in July, up 6 percentage points from January.

Little hope for price drops

As apartment prices rise, many are hoping for a decline, especially as new laws take effect to ease legal hurdles for market supply.

However, Trung suggested that a price drop is unlikely. The rising costs of land, design, landscaping, and amenities all contribute to high input costs for developers.

Currently, developers with available land are primarily in mega-urban areas, where extensive infrastructure and amenities drive up project development costs, leading to high prices for apartment units.

Nguyen Quoc Khanh, Vice Chairman of the Vietnam Association of Realtors, echoed the sentiments, stating that apartment prices in Vietnam are unlikely to decline soon, despite new real estate laws coming into effect.

While the Land Law, Real Estate Business Law, and Housing Law may resolve some internal market bottlenecks, Khanh noted that stricter regulations on land allocation, auctions, and bidding could prolong legal procedures for projects. These delays, coupled with rising financial costs and interest rates, are expected to drive up apartment prices.

Additionally, the new land pricing framework is set to increase compensation costs for site clearance and land use fees. The ongoing global supply chain crisis has further pushed up construction material prices, while labor costs have soared due to a shortage of skilled workers.

According to Khanh, these combined factors are likely to sustain high real estate prices, with little chance of a decrease even under the new legal framework.

The development of transportation infrastructure is also fueling price increases. The Hanoi government and the central government are pushing to develop new transportation routes and bridges to connect the city center with the eastern bank of the Red River.

As a result, the development potential of East Hanoi is substantial. In the future, property prices in the east may even surpass those in the west.

Two to three years ago, buying a home in the east was seen as risky, but now, with the growing population and recreational facilities in the eastern mega-urban areas, the future of the eastern bank’s real estate market looks bright.

Trung forecasts that apartment supply will not significantly improve in the near future. In 2025, the market is expected to have about 23,000 units, and in 2026, 24,000 units - factors that will not likely lead to price reductions.

"In the short term, over the next two years, I don’t see any factors that could bring apartment prices down.

By 2026-2027, if supply improves, there may be opportunities to buy cheaper homes. However, those looking for affordable options will need to consider locations further out, such as Thanh Tri or Phu Xuyen districts," Trung emphasized.