Apartments sales slump, but developers still setting high prices

, Apartments sales slump, but developers still setting high prices
  • Among 58 apartment projects in Hanoi, 60 percent were in the mid-end segment, low-cost apartments accounted for only 13 percent
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No longer seen as a profitable investment segment, apartments are not selling well as investors have shifted to buy land instead.

Recently, a group of men and women in white shirts and black trousers stood on a street in Hanoi, fanning themselves with leaflets. They were officers of real estate trading platforms advertising a nearby apartment project and other products. When seeing passersby, they would rush to give them a leaflet and lead them to the consultation desk.

Such activity reflects the current market. Do Van Thanh, who has worked as a real estate broker in Hanoi for five years, said it is difficult to sell apartments these days.

The number of apartments on sale in Hanoi has fallen sharply, and the process of handing over apartments to customers has slowed down as interest in apartments has waned.

JLL Vietnam’s first quarter report showed that 3,645 apartments were on sale in Hanoi, a 36.6 percent increase over the previous quarter. Most of the projects were introduced to the market many quarters ago but they only recently met requirements for sale after fulfilling necessary procedures.

The Covid-19 resurgence and the long Tet holiday partially affected buyers’ feelings, which led to a 12.6 percent drop in the number of apartments sold. The transactions at high-end projects were poor, especially purchase for leasing, because the number of foreign specialists entering Vietnam remains modest amid the Covid-19 pandemic.

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Analysts say that individual investors tend to choose land foundations and housing in satellite cities and provinces near Hanoi because the products promise more attractive profits than apartments, especially amid the ongoing “land fever”.

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Apartments in Hanoi, especially in inner city districts, were once wanted by investors as well as by those who wanted to buy for accommodation.

Su Ngoc Khuong from Savills Vietnam recalled that in 2011 the credit ‘space’ for the real estate sector was 35-40 percent, while bank loan interest rates surged from 12 percent to 20 percent overnight. At that time, one could make a high profit of $5,000 within a short time by registering to buy an apartment and selling it to others.

There were not many real estate investment projects at that time. Apartments were then priced at a very high $2,500-3,000 per square meter but sold easily because the products promised high profits.

Few affordable apartments

As the number of people living and working in Hanoi has increased, the demand for accommodations is very high. However, affordable apartments priced at below VND20 million per square meter are mostly unavailable.

According to the Vietnam Real Estate Association, of the 58 apartment projects in Hanoi that met requirements to be sold in 2020, about 60 percent were in the mid-end segment, with selling prices of between VND25 million and below VND35 million per square meter.

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Meanwhile, low-cost apartments accounted for only 13 percent, while the remaining were high-end apartments.

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Some commercial housing projects such as Geleximco Southern Star at No 897 Giai Phong Road in Hoang Mai district, Feliz Homes (Hoang Van Thu, Hoang Mai district), and Tecco Diamond in Tu Hiep commune in Thanh Tri district, have prices of VND25-35 million per square meter.

High-end apartments, such as The Nine Pham Van Dong, The Matrix One, D’Grandeur Palace Giang Vo, are priced at VND50-80 million per square meter.

More affordable projects are located in areas far from the city center with poor infrastructure, poor services and unfavorable transport conditions.

As a result, there is a big gap in supply and demand.

Khuong of Savills Vietnam commented that though demand is high, the profit margin that real estate developers can expect from low-cost housing projects is modest.

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Also, prices in Hanoi are escalating rapidly. At some projects, the prices have risen by 10-15 percent following the news that the municipal authorities are planning to release the Red River subdivision plan in June.

According to CBRE Vietnam, the projects opened for sale this quarter are located in more advantageous positions than in the previous period. The prices have increased by 9 percent and 5 percent for high-end and affordable segments, respectively.

The projects in areas where infrastructure items are being built, such as areas along Belt Road No 2, or areas with promising urban planning developments, such as Long Bien district, have seen prices increase by 5-9 percent.

Many housing and urban area projects are expected to be open for sale in both inner and suburban districts in Hanoi, which will create a livelier market. The prices in the primary market are predicted to increase by 4-6 percent in 2021.

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As purchasing power is low, developers will have to apply measures to boost sales. According to JLL, the quoted prices for projects have not dropped, but realtors are running sale promotion programs and offering many preferences, including zero percent interest rate packages, discounts and payment deadline extensions.

This article was originally published in VNA

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