Why is the real estate market difficult but apartment prices do not decrease?

At the announcement of the report "Assessing the recovery process of the Vietnamese real estate market in the third quarter of 2023 and forecasting the market situation in the fourth quarter of 2023" by the Vietnam Association of Real Estate Brokers (VARS) on the afternoon of October 12, Ms. Pham Thi Mien, Deputy Head of the Market Research and Real Estate Investment Promotion Consulting Department (VARS) said that liquidity in the real estate market is gradually improving.

According to Ms. Mien, in the third quarter, the market recorded 5,750 transactions in all segments; this number is 1.5 times higher than the second quarter and more than twice that of the first quarter. In particular, transactions mainly came from the apartment segment and products priced under 3 billion VND.

However, in the first 9 months of this year, the transaction volume was only about 50% compared to the same period last year.

Sharing on the sidelines of the report announcement,Mr. Le Dinh Chung, General Director of SGO Homes Real Estate Investment and Development JSC, said that the real estate market is currently very "paradoxical". That is, although the market is difficult, real estate prices do not decrease, especially in the residential apartment segment.

“The phenomenon of high, increasing or flat prices mainly applies to products in the center of big cities. The reason for not decreasing is due to scarce supply and limited land funds. Although the government is actively removing obstacles for new projects, the progress is still slow and it will take a long time to have products,” said Mr. Chung.

In addition, this leader also said that due to higher input costs such as land tax according to the new price frame, quite close to the market. Or previously, taxes could be paid in each project phase, but now they have to be paid in a short period of time, which forces investors to prepare large cash flows and also makes it difficult to borrow from banks.

The price of raw materials has increased, and products released later to the market are more expensive than those released earlier due to the need to invest in additional amenities and a higher level of completion. With these factors, Mr. Chung affirmed that the prices of apartment products in city centers can only remain the same or increase, but cannot decrease.

Assessing the real estate market situation in the third quarter, Mr. Chung said that in major markets such as Hanoi and Ho Chi Minh City, there have been signs of surpassing the “bottom”. That is, secondary product transactions have been more active, the number of “loss-cutting” products has decreased, and prices have gradually increased.

“The apartment segment for those with real needs, priced under VND5 billion, is showing positive signs. Investor sentiment in major markets is showing signs of improvement, partly due to many positive policy factors. Along with that, many investors’ deposits are reaching maturity; while interest rates are low, investors tend to spread from big cities to invest in neighboring areas.

Land products are also currently experiencing a certain shift, but only in markets around big cities and with products priced around 2 billion VND," said Mr. Chung.

Commenting on the real estate market at the end of this year, Mr. Chung said that housing products still maintain a stable status and transaction speed; it could be more positive.

“The land market will have clearer developments, especially with products under 2 billion, there will be many transactions. With resort products, they will mainly focus on markets near big cities, both for living and exploiting cash flow. Condotel apartments with full legal documents in tourism development markets such as Quang Ninh, Sa Pa... still have good liquidity, especially with apartments around 3 billion VND,” Mr. Chung commented.

Mr. Nguyen Van Dinh, Vice President of Vietnam Real Estate Association, Chairman of VARS Association, said that the market will have more supply and transactions will be promoted more.

“Prices are mostly stable, but for the apartment segment in Hanoi and Ho Chi Minh City, prices are still increasing slightly,” Mr. Dinh added.