Hanoi's apartment prices: When will they cool down?

Surging prices

The first half of this year has witnessed a strong surge in Hanoi’s apartment market, pushing prices closer to those in Ho Chi Minh City in both primary and secondary markets.

In the primary market, the average price per square meter in Hanoi reached approximately VND 60 million, just VND 3 million shy of Ho Chi Minh City’s prices. Prices in the second quarter alone increased by 6.5 per cent compared to the previous quarter and nearly 25 per cent year-on-year.

Over the past five years, large-scale projects like Vinhomes Smart City and Vinhomes Ocean Park have seen significant price hikes. For instance, the price of Vinhomes Smart City in Tay Mo has risen from around VND 30 million per square meter four years ago to VND 80-90 million today.

The primary market’s average price per square meter in Hanoi is nearing VND 60 million, close to Ho Chi Minh City’s figures. The second quarter saw a 6.5 per cent price increase over the previous quarter and a nearly 25 per cent year-on-year surge.

Supply shortage

According to Nguyen Hoai An, senior director at CBRE Vietnam, the price increase is driven by a continued shortage of apartment supply.

While housing demand continues to rise, the number of completed and handed-over apartments in the past 1-2 years has only reached 15,000 - 20,000 units, about half of the 30,000 - 40,000 units delivered annually in 2019-2020.

New supply in the high-end segment still dominates the market, with the strong presence of southern developers keeping primary apartment prices in Hanoi high.

Approximately 70 per cent of the apartments launched in the first half of 2024 were in the high-end segment, priced between VND 60-120 million per square meter.

Sustained high prices

The shortage of apartment supply is also why Dang Truong Giang, deputy general director of Mai Viet Land, believes the continued price increase in Hanoi’s apartment market is not abnormal.

He notes that the Hanoi apartment market has been hot since late last year due to supply shortages, while actual demand remains high, having been pent-up for an extended period.

The return of investors to the apartment market, driven by low-interest rates and the stagnation of other investment channels, has also contributed to the price increase. Investors are now leaning toward products with real value, offering good rental yields and liquidity, making apartments a popular choice due to their safety.

Recent market liquidity clearly reflects the heat in the market. Despite the continuous increase in apartment supply in Hanoi, it still lags behind the demand, Giang added.

According to CBRE, the first half of 2024 saw a strong increase in apartment sales in Hanoi, with the number of units sold exceeding last year’s total.

In the second quarter alone, 10,170 units were sold, five times more than the previous quarter and the same period last year. Major apartment projects in large urban areas in the western and eastern parts of Hanoi continue to see strong sales.

Notably, some projects, despite offering a large number of units, have sold 80-90 per cent of their stock. One project in the west quickly moved to the second phase of sales after the first phase sold out.

Prices set to remain high

With no significant improvement in apartment supply expected in the short term, Nguyen Dung Minh, deputy general director of MIK Group, predicts that average prices will continue to rise from now until early next year.

An shares this outlook, forecasting that Hanoi’s apartment prices will keep climbing, with this year’s price growth of over 20% being unprecedented.

According to An, Hanoi’s price increase outpaces that of Ho Chi Minh City, where apartment prices have seen stable growth of 5-6 per cent per year, following a 15 per cent annual increase from 2015-2019, which has stabilized in the last two years.

Hanoi’s apartment prices may not stabilize until 2026, when a new price level has been established, An predicts.

Another reason why Tran Quang Trung, business development director at One Housing, believes that apartment prices will remain high is the continued strong future demand.

Surveying many customers’ housing needs, Trung reveals that in the next 3-5 years, few people intend to buy properties worth over VND 10 billion, while many plan to purchase apartments valued between VND 3-7 billion in Hanoi.

People from other provinces, such as Bac Giang, Bac Ninh, Thai Nguyen, and Tuyen Quang, are also choosing Hanoi apartments for their children’s university studies or to pass on to the next generation. This change in consumer behavior is driving increasing demand, creating a new price level.

In the context of limited apartment supply due to many projects being legally stuck and unable to proceed, this price level is expected to remain high in the near future.

The forecast for the rest of the year indicates that Hanoi’s market will continue in its current state, and it will not be until after 2025 that the market may see an improvement in apartment supply, Trung concludes.