Hanoi's property boom: Will the housing price surge ever stop?

A temporary shock

Recently, the price of apartments in Hanoi has surged, placing significant pressure on homebuyers and the real estate market. However, some experts believe this could be a “temporary shock” and not necessarily the end of a long-term shift in both prices and housing demand in the capital.

According to data from OneHousing’s market research division, the average price of apartments sold by developers in Hanoi reached a record 72 million VND per square meter in the third quarter. However, Tran Quang Trung, Business Development Director at OneHousing, argued that “this is just the beginning of a new price cycle in the apartment market.”

Trung explained that the supply of apartments in Hanoi is showing strong signs of recovery in the final months of the year. Developers continue to launch new projects, but prices are being pushed higher, largely due to a focus on high-end and luxury projects.

Analysts predict that prices will continue to rise next year, with a number of ultra-luxury developments entering the market and reshaping the supply structure. OneHousing forecasts that the market will receive over 30,000 new apartments next year, equivalent to the peak supply period of 2016-2019. These new units will be concentrated in the high-end and luxury segments, with luxury apartments accounting for 36 per cent.

The Eastern area, driven by major projects like Vinhomes Ocean Park 1 and 2, will lead supply in 2025, holding 48 per cent of the market share. The Northern region, with projects like Vinhomes Global Gate, will contribute 19 per cent, primarily in the luxury segment. Meanwhile, the Western area is expected to have little new supply.

A notable trend is the rise of Masterise Homes, which is expected to account for nearly one-third of the total supply in Hanoi next year. Masterise Homes’ new developments in the East and North, with prices projected around 100 million VND per square meter, are expected to further elevate Hanoi’s price level.

Price trends through 2030

Experts believe that apartment prices in Hanoi will continue to rise until 2030, driven by increasing input costs such as land-use fees, construction materials, labor, and loan interest rates. Additionally, lengthy legal procedures are further raising capital costs.

“Currently, developers are no longer prioritizing the mid-end segment but focusing on the high-end and luxury segments to meet the growing demands of the upper-middle class and maximize profits,” Trung explained.

Looking back at the market from 2015 to 2022, apartment prices in Hanoi rose slowly, by about 2-3 per cent per year, according to CBRE Vietnam and PropertyGuru Vietnam. In contrast, Ho Chi Minh City saw a much sharper rise, averaging 9 per cent annually. However, since late 2023, apartment prices in Hanoi have surged dramatically, and Trung predicts this price increase trend will continue through 2030.

“Although the recent rapid rise in apartment prices in Hanoi may cause a temporary 'shock', this is just the beginning of a new growth cycle,” Trung emphasized.

Potential consequences

According to Trung, Hanoi's apartment market is following a similar trajectory to Ho Chi Minh City's market from 2015 to 2022, with prices climbing rapidly and the market structure shifting. “Before, Hanoi's apartment prices were 30-50 per cent lower than those in Ho Chi Minh City, but now some segments are nearing the prices found in the southern city,” Trung said.

He also noted that a price drop in Hanoi’s apartment market in the near future is unlikely. Based on lessons learned from Ho Chi Minh City, after a period of rapid growth, apartment prices there are now stagnating, awaiting the next price hike without any significant decline. Similarly, Trung predicts that Hanoi's current high prices will not decrease, but may stabilize or level off temporarily, rather than fall.

“With current price levels, the rising costs of construction, limited supply, and demand from the upper-middle class will continue to maintain prices at stable or even higher levels in the long term,” he added.

This prediction strengthens the belief that in the coming years, Hanoi's real estate market will see significant changes, with price fluctuations and shifting demand from both investors and end-users, creating a new landscape filled with both challenges and opportunities.

Nguyen Van Dinh, Chairman of the Vietnam Real Estate Brokers Association, also pointed out that there are many factors making it difficult for apartment prices to decrease. Although supply is increasing, factors like rising land compensation costs and urban development in major cities are pushing prices up.

Dinh warned that without timely regulatory intervention, this could become a serious issue. "The capital trapped in the market, along with the limited supply, has caused prices to soar, but absorption rates are still relatively healthy. However, if prices are not adjusted to a more sustainable level, the market could face liquidity problems."

He also emphasized that if real estate prices continue to rise beyond the affordability of buyers, both individuals and businesses will face difficulties in purchasing and selling properties, while developers will struggle to recover their investments. “If supply and demand don’t meet, the market will face an oversupply risk, which could have serious consequences for the economy and society,” he warned.

These observations highlight the urgent need for measures to stabilize real estate prices in order to prevent the market from facing negative consequences.