Ms. Do Thu Hang - Senior Director of Savills Hanoi Research and Consulting Department - said that many people question liquidity when prices increase. However, reality shows that buyers still accept high prices, reflecting the ability to accumulate assets and income of a large part of urban residents to continue to increase.
Analysts believe that the reason for the high housing prices, despite the sharp increase in supply and inventory, comes from the supply structure leaning strongly towards the mid-range and high-end segments.
Ms. Do Thu Hang said that in Hanoi, the class A apartment segment accounts for a large proportion of new supply, mainly concentrated in the area within Ring Road 3 - where infrastructure and urban services are developed. Meanwhile, the affordable segment has almost disappeared, the mid-range segment has shrunk, making it difficult for real-estate demands to reach.
Supply leaning towards the high-end segment has caused the general price level to increase. The transaction structure by value also shows a clear shift: Apartments over VND4 billion account for a large proportion, while there are almost no apartments under VND2 billion in the primary market. In addition to the factor of imbalance between supply and demand, housing prices remain high due to the impact of input costs.
According to Mr. Vuong Duy Dung, Deputy Director of the Department of Housing and Real Estate Market Management (Ministry of Construction), the biggest challenge at present is still housing prices and the supply-demand relationship, which are also two issues of special concern to the Government and the Prime Minister. Mr. Dung shared that real estate prices have remained high for a long time. The Ministry of Construction has conducted a comprehensive assessment of the causes and researched and proposed "correct and accurate" solutions to reduce housing prices, towards sustainable market development.
Mr. Dung commented that the input cost structure is a key factor affecting real estate prices. In particular, increased land prices and construction investment costs, along with capital costs arising from the long project implementation time, are the main reasons for pushing up housing prices. Therefore, to reduce real estate prices, it is necessary to first reduce input costs, including land use fees and reform administrative procedures to reduce capital costs for projects behind schedule.
From a business perspective, Mr. Nguyen Quoc Hiep, Chairman of the Board of Directors of GP Invest, Chairman of the Vietnam Association of Construction Contractors, also said that real estate prices are currently being strongly affected by input costs, especially land costs.
According to Mr. Hiep, land costs currently account for the highest proportion in the project development cost structure, about 30% for conventional real estate projects and this figure is increasing sharply. Citing a project that his company is implementing, the decision to increase land prices was adjusted up to 30% in just 6 months, causing input costs to increase significantly.
Not only land costs, the long time for procedures and "unofficial" costs also increase capital costs, pushing up real estate prices.
Assessing the real estate supply, Mr. Hiep commented that the supply in many localities is showing signs of being in excess. Mr. Hiep cited that there are provinces that do not have breakthrough economic and social development but plan thousands of hectares of land to develop housing, leading to the risk of forming a "bubble" when the scale of supply far exceeds real demand.
Mr. Hiep proposed that there should be a mechanism to control prices through appropriate tax policies, because without effective regulatory tools, "the increase in real estate prices will be very difficult to reverse".
