3 paradoxes continue to challenge the housing market

Real estate has just gone through a difficult year in most segments. In particular, the housing market faces many challenges in terms of supply and liquidity. Many experts predict that the paradoxes that appeared in the previous period will continue into 2024, requiring sustainable solutions to overcome difficulties for the housing market.

Lack of affordable housing, excess of high-priced housing

Savills data shows that for every 100 new apartments sold in Hanoi in 2023, only three will cost less than VND2 billion. The shortage of affordable housing will peak in 2023 when most new projects are launched in the mid- and high-end segments. Of the total new supply launched last year, high-end apartments accounted for 75% in Hanoi and 84% in Ho Chi Minh City.

A survey of more than 1,000 readers showed that the demand for buying a house under VND2 billion accounted for the majority. About 41% of respondents said their budget was enough to buy an apartment worth VND1-2 billion and 25% were enough to buy an apartment worth under VND1 billion. However, high prices have caused many plans to buy a house this year to be postponed. Half of respondents said they did not want to buy because the current apartment prices were too high, beyond their financial capacity.

Mr. Nguyen Van Dinh, Chairman of the Vietnam Real Estate Brokers Association, acknowledged that the product structure in the housing market is increasingly unbalanced as the market lacks affordable commercial housing. If in 2019, this segment accounted for 30% of the total newly launched supply, now it is only about 6%. Prices below VND25 million per square meter are only available in social housing projects or projects in outlying provinces.

According to Mr. Dinh, supply is unlikely to increase in the short term, so the paradox of a shortage of affordable housing and an excess of high-priced housing may continue this year. Legal bottlenecks make management agencies more cautious in approving projects, but also cause businesses to face difficulties in output, without resources to pay debts and develop new projects.

Social housing is scarce in some places and unsold in others.

Eight months ago, more than 1,300 low-income people had to draw lots to win 149 places to buy social housing at NHS Trung Van, Nam Tu Liem District, Hanoi. The selling price of the investor is 19.5 million VND per square meter, including VAT.

This situation is not uncommon in large cities. At the end of 2023, Dong Nai province also conducted a lottery for workers at Apartment Building A6 - A7, Quang Vinh Ward, Bien Hoa City. The number of applications was twice the number of apartments for sale. The selling price of this project is about 18.8 million VND per square meter.

In contrast to the "hot" scene above, many social housing projects have fallen into the situation of being opened for sale dozens of times but still unsold. Typically, the AZ Thang Long project in Lai Xa village, Kim Chung commune, Hoai Duc district, Hanoi opened for sale 27 times in 9 years but has not sold out. Or Bac Ninh has just sold more than 350 worker housing units in mid-2023 but still has more than 1,300 units "unsold", although this is the province with the most industrial parks and workers in the North.

Mr. Pham Thanh Tuan, a real estate legal expert, said that the location of the land fund will determine the liquidity of housing projects, including social housing. According to him, it is not necessary for all urban areas from type I to type III to reserve land for social housing. The development of projects also needs reasonable planning, located in areas with high urbanization levels, dense population, avoiding the situation of planning "good pieces for sale, bad pieces as gifts".

Sharing the same view, Mr. Nguyen Hoang Nam, General Director of G-Home Joint Stock Company, said that the scene of thousands of people lining up to buy social apartments is an isolated case in some projects with central locations - an advantage that not all social housing projects have. When land funds in urban centers are increasingly scarce while the target of building social housing in many localities is high, the paradox of places lacking social housing and places lacking social housing may continue if not planned properly.

House prices rise against the economy

As the real estate market begins to decline from mid-2022, expectations of a housing price correction similar to the 2008-2009 period emerge. In particular, 2023 is a time when the market is facing comprehensive difficulties, and expectations of a reduction in housing prices are even higher.

However, data from many research units shows that the asking prices of apartments and townhouses are still increasing continuously and staying high, despite the general difficulties of the economy. Data from Cushman & Wakefield shows that apartment prices in Hanoi in the fourth quarter of 2023 reached about VND56 million per square meter, up 27% year-on-year. Similarly, townhouses also increased by 9% quarter-on-quarter, reaching about VND142 million per square meter. In Ho Chi Minh City, most primary projects still maintain their selling prices.

Mr. Nguyen Quoc Anh, Deputy General Director of Batdongsan channel, said that contrary to expectations of a sharp drop in real estate prices in 2023, the general market level increased slightly by 6% compared to the beginning of the year. This situation may continue to challenge the housing market in 2024 because supply is difficult to clear in the short term. Meanwhile, there are many reasons for the escalation of housing prices such as objective factors (input costs including land, raw materials, and increased interest rates) and subjective factors (investors only prioritize high-end, luxury houses).

Experts warn that the continuous increase in housing prices, exceeding the affordability of the majority of people, could have negative consequences for the market, such as creating a virtual price range, causing a supply-demand imbalance and reducing liquidity. The long-term solution is still to build a smooth transport infrastructure and good regional connectivity to promote the supply of affordable projects and increase people's access to housing.