Lowest Supply and Transactions in Years

According to Savills quarterly market report, primary stock in Q4/2022 was the lowest in five years at 926 dwellings from 15 projects, which decreased by 22% quarter-on-quarter (QoQ) and 18% year-on-year (YoY). New supply of 45 dwellings came from the first phase of a new project and the next phase of an existing project, decreasing by -91% QoQ and -82% YoY. Legal difficulties and complex planning procedures are some of the largest barriers developers are facing in implementing new projects.

There were only 196 transactions in Q4/2022, decreasing by -34% QoQ and 52% YoY. Townhouses remained the most popular product, with 85% of sales. Quarterly absorption of 21% fell by -4% QoQ and -15% YoY. Credit tightening and several scandals have negatively affected buyer confidence. In 2022, there were only 1,458 transactions, decreasing by -44% YoY and the fewest since 2015.

Will Market Difficulties Influence Prices?

As high prices have slowed transaction activity in recent quarters, several developers have adjusted their selling prices. Primary villa prices decreased by -6% QoQ to VND 130 million/m2, while townhouse prices decreased by -1% to VND 172 million/m2. Shophouses had the most significant adjustment with a decrease of -10% to VND 189 million/m2.

For the secondary market, 2022 had price increases YoY, driven by urban districts with limit  ed land banks amid high buyer confidence in the first half. However, by Q4/2022, villas and townhouses had the first secondary price decrease since 2019, and shophouse prices fell from Q3/2022.

Ms Do Thu Hang, Senior Director of Advisory Services, Savills Ha Noi, said that villa and townhouse prices trended downward trend in the final quarter of 2022, but the actual value adjustments would not do much to improve accessibility for most buyers.

“The general prices of landed properties in Ha Noi have remained high. Dwellings from VND 10 to 30 billion had a 55% share of stock and dwellings above VND 30 billion took a 20% share. Those below VND 10 billion had a 22% share. For developers, initial investment costs are also higher, including land costs, capital, and finance. During development phases, unforeseen issues can result in higher costs. For example, the prolonged approval process pushes up the cost to the investor, which ultimately means customers pay more.” Ms Hang said.

Ms Hang shared that liquidity can be improved in 2023, but buyers will largely be occupiers rather than investors. Ha Noi will need high-quality projects with reasonable prices because existing inventories are expensive and could be unattractive to buyers. The city is facing competition from neighbouring provinces such as Hung Yen and Bac Ninh, which are delivering high-quality residential products serviced by rapidly improving infrastructure.

Approximately 1,600 dwellings from 15 projects are expected in 2023. Hoai Duc will provide 20% of future supply, followed by Thanh Tri with 16%, and Long Bien with 15%. Mr Matthew Powell, Director of Savills Ha Noi, shared: "New infrastructure will boost the housing market. Once completed, Ring Road 3.5 and Ring Road 4 will support the development of over 80 projects spanning 2,900 hectares in surrounding districts such as Hoai Duc, Me Linh, Ha Dong, Dan Phuong, and Thuong Tin. In addition, supportive policies that minimise obstacles and promote easy development of infrastructure will drive recovery in 2023."

No matter your real estate needs, our experts provide objective metrics, considered insights, and reports that stand up to scrutiny. Contact Savills Advisory Services  for more information