Hanoi is getting hotter, Ho Chi Minh City is slowing down

Not only apartments but also land, townhouses and villas in Hanoi are showing signs of “leaving far behind” in demand compared to Ho Chi Minh City.

If we compare supply and transactions in different segments, we will see clearly: Hanoi real estate shows signs of “hot growth”, while the recovery curve of Ho Chi Minh City is somewhat stable, even slower than in the 2020-2021 period.

In 2021, insiders predicted a “phase shift” between the two major cities. In particular, Mr. Dinh Minh Tuan, Director of Batdongsan.com.vn Southern Branch, commented that the recovery of the real estate market in Ho Chi Minh City will be one beat slower than that in Hanoi.

The proof is that in the third quarter of 2021, the Hanoi real estate market decreased in interest when it was at the lowest position compared to the other two regions, Da Nang (48%) and Ho Chi Minh City (50%). However, in September 2023 alone, Hanoi had a strong recovery in interest, reaching 75% compared to the beginning of the month, while Da Nang was 44% and Ho Chi Minh City was 30%.

At that time, Batdongsan.com.vn explained that Hanoi was the market least affected by the Covid-19 outbreak while Ho Chi Minh City was heavily affected. The entire market had to stop trading for a long time. In the third quarter of 2021, the level of interest in many segments in Ho Chi Minh City such as land, private houses or apartments decreased by about 40 – 60%. Meanwhile, in Hanoi, the level of interest decreased but at a lower rate.

Perhaps, Hanoi real estate has had better “momentum” than Ho Chi Minh City since the post-Covid-19 period. This momentum has been maintained until now, moving towards excitement earlier even though both markets have gone through a long period of common fluctuations.

Abundant supply

Explaining the question “Why is Hanoi real estate constantly heating up from apartments to villas and townhouses while Ho Chi Minh City is slowing down?”, Mr. Vo Huynh Tuan Kiet – Director of CBRE Vietnam's housing department said that the reason for this is because the supply trends of Hanoi and Ho Chi Minh City are happening in opposite directions.

Specifically, in the first 6 months of 2024, Ho Chi Minh City only reached about 1,600 apartments. Meanwhile, the corresponding figure in Hanoi was nearly 11,000 apartments. In addition, Hanoi's absorption rate also increased correspondingly with 12,000 apartments sold in 6 months, while Ho Chi Minh City only had 1,700 apartments. “Just looking at this number, we can easily see that Hanoi has a much more vibrant market than Ho Chi Minh City,” Mr. Kiet emphasized.

It is forecasted that from now until the end of 2024, the new supply of apartments in Hanoi will continue to be more abundant with more than 9,000 new apartments for sale, bringing the total number of new apartments for sale in 2024 to nearly 20,000. This will be the highest supply of new apartments for sale in Hanoi in the past 5 years, since 2020.

Price is even lower than in Ho Chi Minh City

Currently, the apartment price level in Hanoi is increasingly approaching the price level in Ho Chi Minh City in both the primary and secondary markets. The price gap has gradually narrowed from 25% (in 2022) to about 10% (early 2024). This shows that Hanoi has the advantage of a soft price, so the price increase is still high. The primary price increase of 20-25%/year to “catch up” the apartment price level in Ho Chi Minh City is also an understandable development when there was a period when Hanoi was “overwhelmed” by Ho Chi Minh City in all aspects.

Recently, 70% of new supply to the Hanoi market is in the high-end segment, which has caused the primary price level of apartments to increase.

In addition, the completed and handed-over apartment fund in the past 1-2 years has only reached about 15,000 – 20,000 units, which is not really abundant. Meanwhile, in the period of 2019-2020, the handed-over apartment fund reached 30,000 – 40,000 units/year. The demand for housing is constantly increasing, contributing to the continuous increase in primary selling prices in Hanoi in the first months of 2024.

Hanoi investors' psychology has been “repressed” for a long time, reaching the stage of “spending money”

Mr. Vo Hong Thang, Deputy General Director of DKRA Group, explained that the phenomenon of increasing real estate prices in Hanoi partly comes from the long-term “repressed” psychology of investors.

According to Mr. Thang, after a long period of market fluctuations (2020 – 2023) due to epidemic factors as well as market adjustments, it has invisibly created a “suppressed” mentality on the real estate investment needs of investors in Hanoi in particular and the North in general.

These groups are the main factors contributing a large proportion to the structure of real estate buyers nationwide. The market still has potential risks, unpredictable variables, and the high demand for housing in the core area of ​​Hanoi makes these investors prioritize choosing near where they live instead of “fishing far from shore” as before.

Thus, the fact that investors “congregate” in Hanoi instead of going to other provinces and cities to buy real estate has pushed the Hanoi market to heat up.

In Ho Chi Minh City, besides the continued small supply, the primary price level has only increased slightly. The increase of 3-5% year-on-year is quite modest compared to one of the most vibrant real estate markets in the country. Low supply reduces choices, while slow price increases are also not attractive to investors. That is one of the reasons why real estate demand in Ho Chi Minh City recovers slower than in Hanoi.

Mr. Vo Huynh Tuan Kiet said that businesses in Ho Chi Minh City do not risk increasing prices at this stage because there was a time when the apartment price level in Ho Chi Minh City was constantly being set up. Prices were already high and investors had to maintain a safe increase to ensure the ability to consume products.

In addition, 2024 is a pivotal year for the new Laws to come into effect, and businesses are waiting for changes from the Law that are more important than increasing selling prices. “Investors do not want to sell at par, but also do not want to push prices up to take risks in the context of the market still facing challenges in terms of liquidity and trust that has been eroded over a long period of time,” said Mr. Kiet.

Recently, real estate projects for sale in Ho Chi Minh City have continuously introduced good sales policies and many incentives, showing that investors are facing price pressure. Promoting policies is also a way for investors to seek demand again, making up for the period of skyrocketing prices. Because when real estate prices have increased, investors find it difficult to directly reduce the product, but must use accompanying policies.

In fact, Ho Chi Minh City real estate has been gradually recovering recently. Specifically, the townhouse and apartment segment has maintained a stable rhythm. From the beginning of 2024 until now, secondary apartment prices have not decreased as in the period of 2022-2023, with a tendency to increase slightly compared to mid-2023. Although it is still about 10% away from the highest price peak at the end of 2021, this is a good sign that the market has passed the “bottoming out” stage.

In the land segment in the suburbs of Ho Chi Minh City and neighboring provinces, liquidity has begun to return, especially real estate with a value of less than 2 billion thanks to being affordable for many people. From a decrease of 20% -30% compared to the peak in 2021, it has slightly increased to 10%.

Looking at the overall market, according to Mr. Kiet, buyers will not have the opportunity to wait for real estate prices in Ho Chi Minh City to decrease. Reducing housing prices is very difficult unless the market focuses on developing a new segment.

It is easy to see that after a period of market fluctuations, the demand for buying real estate in Ho Chi Minh City for real residence has “reigned”. At this stage, Ho Chi Minh City is considered a market for real buyers.

Assessing the Hanoi real estate market, Mr. David Jacskon, General Director of Avison Young Vietnam, said that the “price fever” of Hanoi apartments in the first months of 2024 reflects that the purpose of real estate investment and speculation has somewhat overwhelmed the need to buy a house for settlement.

For example, some apartment projects in Hanoi have increased in price from 300 to 700 million VND in just 1-2 months; or a villa project in Hoai Duc district, 16km from the center of Hanoi, has increased in price by 40% in 8 months.

If placed in the context of the real estate market not yet improving significantly, loan interest rates have decreased but are not stable, the macro economy is still recovering, the trio of new laws related to real estate need more time to absorb… then “hot growth” is somewhat unstable.

In Ho Chi Minh City and neighboring provinces, real buyers have more affordable housing options. The strong development of infrastructure in the near-central areas helps buyers access projects with affordable prices, around 50 million VND/m2.

“Therefore, overall, the Ho Chi Minh City market is recovering in a more balanced direction. Selling prices are growing steadily, market sentiment remains positive and transactions are stable,” said expert Avison Young.

After the purification process, the real estate market in Ho Chi Minh City has the presence and contribution of reputable domestic and foreign investors. They have strong financial potential combined with experience in methodical project development, which is beneficial for home buyers. Most of the projects implemented in the past have completed all legal procedures and have fast construction progress, thereby creating trust among buyers and investors.

With the trio of Land Law, Housing Law, and Real Estate Business Law officially taking effect, the real estate market in Ho Chi Minh City is expected to continue to turn around, witnessing more positive recoveries in the medium and long term.

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