Vietnam's housing prices rise amid Covid-19 outbreak

Despite the fourth Covid-19 outbreak having somewhat frozen the real estate market, housing prices, however, are still on the upward trend.

The real estate market remains an attractive option for investors who have a good understanding of the market. Photo: Cong Hung

A recent report from Savills Vietnam on Hanoi’s property market in the first six months of this year showed housing prices have been on the rise for 10 consecutive quarters, with sale prices at an average of US$1,625 per square meter, up 7% against the previous quarter.

In  Ho Chi Minh City (HCMC), nearly 40% of the housing projects recorded an increase of 15% in sale prices in the second quarter of this year.

Rising housing prices, however, came with a declining number of transactions. According to Savills Vietnam, the absorption rate of new supply in Hanoi stood at only 23%, significantly lower than in previous quarters.

A similar story is seen in the HCMC with the rate at a five-year low by a decline of 35% quarter-on-quarter or only 1,400 units sold.

On the issue, Nguyen Van Dinh, General Secretary of the Vietnam Association of Realtors (VARS) told The Hanoi Times that since 2019, the market has been facing a dual challenge of scarce supply due to stricter regulations and the pandemic.

“Low supply of new housing projects that have been persisting for years and growing demand are driving up the market prices to a new height. Buyers, however, are not willing to fork out more money for a property, and this is while market demand is high but the absorption rate still remains low,” Dinh added.

Dinh predicted that housing prices to continue rising in the future, especially as average land prices in many provinces/cities have been adjusted with an increase of 15%, and hiking prices of construction materials by 50%.

Such issues, however, could not undermine the market that is seen as an attractive and viable investment channel at the moment. A Report from batdongsan.com.vn showed interests for properties expanded at an all-time high pace of 378% despite the pandemic.

Dinh from the VARS attributed the trend to the low-interest environment and a huge amount of capital being poured into the market from other fields that remain stagnant during the pandemic.

“Most investments at the moment are based on speculation, which poses high risks of unsustainability as they could be withdrawn in case investors see things do not go as planned,” he added.

“The market, of course, can be an attractive option if participants have an adequate understanding of it and choose the product within their financial capabilities,” Dinh continued.

Sharing the same view, the Chairman of BHS Group Nguyen Tho Tuyen told The Hanoi Times that along with the stock market, real estate is seen as the most attractive investment option at the moment.

“They should be aware of legal issues for any project that is under consideration,” Tuyen said.

For the real estate market to soon return to normal, Director of Savills Vietnam Matthew Powell said the priority would be to speed up vaccination programs and contain the pandemic.

From now until year-end, Powell expected there would be uneven market development among the segments or products in provinces/cities, depending on the Covid-19 situation.

Powell said once the pandemic is contained, not only domestic but also foreign investors are set to return, with major markets such as Hanoi, HCMC, or Danang being the key targets.