In the Macroeconomic Report for the first quarter of 2019 recently published, the Institute for Economic Research and Policy Assessment of the real estate market in big cities is being supported by large demand. However, the apartment market faces a decline in apartment supply in both major cities, Hanoi and Ho Chi Minh City.
The report clearly stated that in Hanoi, class A apartments decreased by 84%, class B and C decreased by 35% (compared to the beginning of the quarter). However, compared to the same period in 2018, the number of apartments launched on the market still increased by 76%; the mid-range apartment group is still the most popular segment, accounting for more than 70% of the transaction volume (according to Savills).
In Hanoi, the selling price of class B apartments is about 1,390 USD/m2, down 2% quarter-on-quarter but up 8% year-on-year.
In Ho Chi Minh City, similar developments occurred, the number of apartments launched on the market reached 4,500 units, down 51.5% in the first quarter and down 57% compared to the first quarter of 2018.
Explaining the reason for the decrease in apartment supply, Associate Professor, Dr. Nguyen Duc Thanh, Director of VEPR, said that it was due to the prolonged legal approval process.
In addition, the low-income class C apartment market, accounting for more than 85% of the market share, is concentrated in the suburbs and also faces a decrease in supply despite always increasing demand.
"It is forecasted that supply in the following quarters will improve rapidly because more than 34 projects will be added to the market such as VinCity Ocean Park, BRG Smart City in Hanoi, the legal approval process will also be accelerated. However, with banks continuously tightening loans with higher interest rates than in 2018, the real estate market will also face many difficulties from both supply and demand.
Tightening bank capital is considered a necessary measure when the real estate market has developed rapidly in the past 5 years, and land funds are limited. To overcome this barrier, businesses need to build clean land funds along with projects under implementation while individual investors need to avoid taking advantage of financial leverage to speculate.
In addition, the real estate market is still a field that will attract the attention of foreign investors in Vietnam. According to the Foreign Investment Agency - Ministry of Planning and Investment, in the first months of 2019, real estate continued to be invested with 500 million USD, accounting for 5% of total FDI, ranking second after the processing and manufacturing industry" - Mr. Nguyen Duc Thanh explained.
