Luxury real estate prices are rising but there are few properties for sale

Branded Residences or super luxury real estate are products with an average selling price of 12,000 USD per square meter (equivalent to over 300 million VND per square meter) that are gradually becoming familiar to the Vietnamese market. Ms. Pham Ngoc Thien Thanh, Deputy Director of Market Research Department of CBRE Vietnam, said that to meet the criteria of branded and super luxury, real estate must have the factors of location - management - brand. Specifically, in addition to the "golden" location in the central areas, luxury and super luxury projects must have the participation of international management and operation brands, with service standards according to 5-star hotel standards. There are currently very few projects that meet the above criteria in Vietnam.

According to data from CBRE Vietnam, from 2022 to present, in both Hanoi and Ho Chi Minh City, the supply of branded real estate accounts for less than 1% of the supply.

Savills' report also shows that in the past 3 years, the number of branded real estate in Ho Chi Minh City and Hanoi has increased but not significantly. Specifically, in the high-rise segment, Ho Chi Minh City has 1 super luxury apartment project, Grand Marina Saigon, with a scale of 1,121 apartments. Hanoi has 1 project, The Ritz-Carlton near Hoan Kiem Lake, providing 141 apartments.

With limited supply, the selling price of super luxury apartments has also increased sharply in recent times. The Sea Tower with the JW Marriott brand of the Grand Marina Saigon project has just been topped out with the investor's price starting from 400 million VND per square meter, the rental price is about 200 million VND per month. The secondary price here also increased by at least 10% after the topping out and handover. The Ritz-Carlton Hoan Kiem apartment is priced from 380-450 million VND per square meter, the secondary price also differs by 8%.

Or in older projects such as Vinhome Ba Son, although handed over since 2018, the current transfer price is from 120-250 million VND per square meter. Villas here have an average price of 600 million to 1.6 billion VND per square meter, with a total value of about 500-700 billion VND per unit. Another luxury project, The Nexus, has not yet opened for sale but is expected by the market to be no less than 250 million VND per square meter.

According to Ms. Thanh, with super luxury real estate, location is very important but not the top criteria, the management and brand factors create the real value. In the world, a project that is highly appreciated for its quality of operation can increase in price by an average of 8-70% per year. In Vietnam, two super luxury projects in Hanoi from 2020 to now have an average price increase of 4-8% per year.

In Ho Chi Minh City, taking the Vincom Dong Khoi project as an example, it is not really a luxury real estate at present, but through many ups and downs of the market, the house prices here have only increased, not decreased. However, the market is also difficult to find secondary products for sale because the owners of this type have little need to transfer.

"Most people buy luxury and super luxury real estate to store assets or live in. Once these properties are sold, it will be very difficult to buy them back because they are located in locations where you cannot build a house if you want to," Ms. Thanh emphasized.

Sharing the same view, Mr. Matthew Powell, Director of Savills Hanoi, said that luxury and ultra-luxury real estate can be considered a safe investment in Vietnam. Although this market is relatively small, projects in this segment, thanks to their prime locations and high-quality operations, have always maintained stable demand over the past two years. Exclusivity and privacy, brand reputation, investment potential, and the scarcity of prime locations, have contributed to a steady price increase trend, especially in the secondary market.

Sharing about the customer base of the super luxury housing segment, according to the representative of the investor Masterise Homes, the unit that is developing many super luxury real estates in Ho Chi Minh City, the main customer base of this segment is the "super rich" group, usually business leaders, A-list artists. They buy for the purpose of saving for their children, buying to live in, investing for rent. Therefore, very few customers buy for resale investment, even if they intend to resell, it is not in the short term. Therefore, despite the rapid increase in secondary prices, the number of branded products for transfer on the market is not much.

"The strength of branded real estate is location and quality of operation. Branded buyers not only show their living standards but also know how to enjoy life. They usually do not lack money, so if they buy, they will not have much need to transfer," this person said.

According to Knight Frank, in the third quarter of 2023, only 362 ultra-luxury homes priced at over $10 million were sold in the world's top 12 markets. This supply decreased by 2.4% compared to the same period last year. The total value of ultra-luxury real estate sales reached nearly $31.7 billion over the past year. According to this unit, ultra-luxury home sales are quite stable compared to other segments. However, sales are forecast to decrease more in 2024, mainly due to the decrease in the number of ultra-luxury homes being built.

Knight Frank's "Prosperity Report - Asset Pricing Model" also shows that the number of super-rich people in Vietnam has increased by 82% between 2017 and 2022. It is forecasted that by 2027, the number of super-rich people in Vietnam will increase by 22% compared to the present, and equivalent to an increase of 122% within 10 years.

In addition, Vietnam's wealthy population with assets of $1 million or more has also increased by 70% in the past 5 years. It is expected to skyrocket by 173% in the 10-year period from 2017 to 2027. Luxury and ultra-luxury real estate is therefore also forecast to maintain its upward momentum due to the scarcity of supply and the tendency for the customer base to expand in the coming years.