Limited Affordably Priced Homes in Ha Noi

Fall in Primary Supply and Transaction

In the first six months of 2022, residential sales in Ha Noi slowed compared to the last quarter of 2021 amidst a primary supply shortage of apartments and landed properties and high primary prices.

According to Savills latest research, apartment supply decreased by -16% year-on-year (YoY). Despite supply reaching a five-year low in Q4/2021, supply dipped even further in Q2/2022.

Ms Do Thu Hang, Senior Director of Advisory Services at Savills Ha Noi, shared that lengthy legal procedures are making it difficult for real estate companies to develop housing projects, which has resulted in the shortage. Tightened credit controls and rising construction costs have also posed serious challenges.

In Q2/2021, there were 1,950 primary landed dwellings, however, this has nearly halved by Q2/2022. Sales dropped by -55% QoQ and -72% YoY in Q2/2022.

New supply was largely decentralised and future supply for the rest of the year will come from Gia Lam District (east), Hoang Mai District (south), Hoai Duc and Ha Dong districts (west) and Tay Ho, Bac Tu Liem, and Dong Anh (north).

There is a significant shortage of affordable and low-cost residential properties. Apartments under VND 20 million /m2 are fully sold and the market does not expect new supply soon. Recently, Vingroup announced its plans for its social housing development Happy Homes, which will deliver low-cost apartments over the next few years.

The city plans to launch a housing development program by 2025; the fund will be worth VND 65 trillion and will support developers and buyers in the social housing space. However, social housing is a challenging segment. Hang said: “Many developers reserve 20% of residential land bank for social housing development, however, very few use and execute these plans effectively. This is largely due to complicated legal processes and unmet profit expectations. If the land bank for social housing is utilised properly, supply will improve.”

Prices Rise

Despite a fall in supply and transactions, housing prices in Ha Noi keep trending upward. Apartment prices have risen continuously; in H1/2022 the price gap between primary and secondary apartments was 44%, rising from 14% in 2018.

Villa prices have doubled since 2018, and townhouse prices have increased by more than 50%. In H1/ 2022, secondary villa prices increased by 37% and shophouse and townhouse prices rose by 20%. The limited primary supply and rising prices are driving secondary interest.

“We expect liquidity to improve once more affordable supply enters. The price increases have resulted from difficulties that will not be solved rapidly. Legal procedures and cost-related concerns will hinder major changes. However, the entry of more affordable supply will likely improve performance and liquidity,” Ms Hang said.

Conclusion

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