Real estate market research companies say that 2024 will be a year of great interest in real estate prices and difficulties in owning real estate. Phrases such as “high real estate prices” and “young people have difficulty buying a house” have quite a high number of searches.
According to information from a number of market research units, in Hanoi, apartment prices by the end of 2024 increased by more than 50% compared to the first quarter of 2023, while in Ho Chi Minh City, the increase was 17-30% compared to the price level in 2023.
Talking to many investors, the businesses themselves are also under no small amount of pressure when land prices increase sharply, along with land use costs that investors have to pay. These factors have pushed the final selling price to a level that is difficult to access.
Investors typically expect a 7% annual return, or 35% for a five-year project, to ensure they recover their capital and meet their shareholder returns. However, not all projects achieve this return, especially if management is ineffective or the market is volatile. Therefore, a price reduction is unlikely. Future prices may only increase to a certain extent, rather than fall sharply, due to factors such as investment costs and market demand.
SSI Research experts have also just reported on the real estate market, showing that in the final period of 2024, prices in the primary and secondary apartment markets will increase in both Hanoi and Ho Chi Minh City. SSI experts believe that the new Land Law, which will take effect from August 1, 2024, is also a factor contributing to the price increase. This law directs the replacement of the old land price framework, with a new price list updated annually according to market prices.
Some provinces and cities such as Ho Chi Minh City, Hanoi, Hai Duong, Bac Giang and Lam Dong have issued new land price lists, with land prices increasing significantly from 20% to 50 times. It is expected that by 2025, all remaining provinces will issue new land price lists and apply from 2026.
At the end of September 2024, the Ministry of Construction recorded a significant increase in real estate prices. The Ministry of Construction is also concerned that the new land price list could increase housing prices by about 15-20%. In fact, land use fees fluctuate significantly and account for a large part of housing project investment costs, ranging from 7-20% for high-rise apartment investment projects and from 25-50% for villa and townhouse investment projects.
In 2025, CBRE expects new apartment prices in both Hanoi and Ho Chi Minh City to continue to increase by about 5%. With CBRE's estimate of about 30,100 new apartments being launched in the Hanoi market, a slight increase compared to the estimated apartment supply in 2024, SSI Research expects new apartment prices to stabilize after the recent period of rapid increase.
Accordingly, primary apartment prices are expected to stabilize at the current level due to a number of factors: primary apartment prices are significantly higher than the average in 2024, which may limit people's housing and investment needs; home loan interest rates are expected to stabilize and remain lower than pre-COVID-19 levels, thus continuing to support homebuyer demand; developers will need to deploy broader and stronger sales and marketing strategies to boost demand without affecting new apartment offering prices.
