Villa and townhouse transactions worst in 10 years

Savills' recent market report shows that Hanoi's villa and townhouse transactions in 2023 were only 359 units, the lowest since 2014. The total number of transactions decreased by 76% year-on-year and the absorption rate also decreased by 31% year-on-year. In the fourth quarter of 2023 alone, only 64 units were traded, down 67% year-on-year.

Meanwhile, the new selling price of Hanoi townhouses continued to increase. The strongest increase was in primary villas, up 55% quarter-on-quarter to VND160 million per square meter of land. Townhouse and shophouse prices also increased by 3% quarter-on-quarter, reaching VND194 million per square meter of land and VND328 million per square meter of land, respectively.

In the 2023 market summary report, the Ministry of Construction also stated that the selling price of villas and townhouses in Hanoi is still high despite low transaction volume. The selling price of this segment is more than 100 million VND per square meter, with some projects reaching more than 300 million VND per square meter, concentrated in the western area of ​​Hanoi.

Ms. Do Thu Hang, Senior Director, Research and Consulting, Savills Hanoi, said that 2023 recorded the lowest number of villa and townhouse transactions in Hanoi in nearly 10 years.

The reason is the low supply in the market, leading to a decrease in the number of units traded. Ms. Hang said that the primary supply reached more than 700 units from 16 projects, down 23% year-on-year, of which townhouses accounted for the majority of the market share with 44%. If we only count new projects, the whole year of 2023 will have only more than 270 units, down 82% year-on-year to the lowest level in a decade. In particular, the number of new projects from Ring Road 3.5 onwards is also increasingly small.

In addition, high cost of inventory has caused most investors to not change prices, or even continue to increase the prices of new baskets of products. According to experts, investors bear huge construction investment costs and land use fees, directly affecting the output price of the product. In addition, investors are very cautious in 2023, prioritizing legal procedures or construction progress over bustling pre-sale activities like in the previous period.

However, the high selling price has created a big barrier for low-rise home buyers. Ms. Hang said that many investors are afraid to offer prices lower than expected, so buyers have to pay a rather high opening price. Therefore, if the selling price is reasonable, the project, even though it is far from the center, still has quite good liquidity, such as the low-priced products in Me Linh that were sold in the third quarter of 2023.

High opening prices have prompted buyers to turn to the secondary market, which offers more options, affordability and legal certainty. Savills experts said that the average price per square meter of secondary villas is 7% lower than the primary price. Secondary townhouses are 24% lower than primary products and secondary shophouses are 40% lower.

Supply in the near future will improve significantly. Savills forecasts that by 2026, the market will have 14,000 new units from 37 projects. The area with the most new supply is Dong Anh with a 30% market share of new supply. Large projects will increase supply to the market, including Vinhomes Co Loa and Vinhomes Wonder Park. In 2024 alone, the market will have more than 2,900 new units from 13 projects. Of which, 82% will come from new projects.

Ms. Do Thu Hang acknowledged that infrastructure development such as Ring Roads 3, 5 and 4 will expand the Hanoi housing market. In the period of 2024-2026, suburban areas will account for 75% of new supply.