Residential prices in Hanoi may only increase slightly, if at all, towards the end of the year.
More positive signs were evident in Hanoi’s real estate market at the end of Q3 than last year. However, many experts have forecast that residential prices in the capital won’t rise until the end of the year. According to the latest report from Savills, in Q3 2014 Hanoi’s residential price index was 102.7, up 2.4 points quarter-on-quarter and down 0.6 points year-on-year. The quarter-on-base index was still trending downwards in Q3, at 88, but was up 4 points compared with Q2 2014. Increases in both quarter-on-quarter and quarter-on-base can be viewed as positive signs for the market.
The inventory ratio declined sharply, by 24 points quarter-on-quarter, thanks to strong performance in the market as a whole. In Q3 the absorption rate in Hanoi was 38 per cent, up more than 15 percentage points against Q2. The report also showed that the average price in Q3 was approximately VND25.2 million ($1,176) per square meter, an increase of 2 per cent. Districts such as Hoan Kiem, Tay Ho, and Ba Dinh had the highest prices due to their central locations and high-grade projects.
Although most indices relating to Hanoi’s residential price increased slightly, it is difficult to say for certain that the residential market will be healthier in Q4. According to Mr. Alan Phan, an economic expert, the real estate market may see no fluctuations in price from now to the end of the year. The residential price will remain stable, except at some projects with significant inventories, where investors are keen to reclaim their capital.
Though not continuing downwards, prices in the residential market will not significantly increase over the next few months. Mr. Vu Dinh Anh, another economic expert, said that improvements in Hanoi’s housing prices depend heavily on many laws, such as the Law on Land, the Law on Housing, and the Law on Real Estate, in which the government has discussed amending some articles this month.
Regarding prices in each segment, the Vietnam Real Estate Association has predicted that prices in Hanoi’s residential market will remain stable. The luxury segment, however, is likely to increase slightly due to convenient locations and high quality. The launch of the Lotte Center Hanoi and other commercial centers have also driven up prices in nearby projects.
According to a report from CBRE, prices of apartments for resale were also on an upward trend, increasing by 1 per cent. Resale prices improved in most segments, especially mid-end apartments. Mr. Richard Leech, Executive Director of CBRE, told a recent press conference that the recovery of resale prices in the mid-end segment shows that resale buyers are finding mid-end apartments more attractive.
The rental market has been growing in Hanoi, as property prices are still high for many young people wishing to own their home. The rental market is expected to become bigger and better regulated to cater to housing needs.
It is clear to see that residential prices in Hanoi are showing few signs of improvement. According to a report from Cushman & Wakefield Vietnam’s, shortcomings in government policies have restricted domestic developers from investing in the city’s real estate market. Moreover, credit tightening by banks has made many people hesitate to borrow money to purchase a home. With the year about to come to an end, many property companies have cut prices and conducted promotions to attract buyers, which means the residential price in Hanoi will remain low or only increase slightly.
- Cushman & Wakefield Vietnam