It marked a 26.2% increase from full-year 2023, a contrast from 2022 and 2023, when supply fell and was blamed for driving up prices.
Property consultancy CBRE said the surge in supply this year has “ended the period of housing shortages in Hanoi,” but, much to the dismay of prospective buyers, new apartment prices have not just remained firm but actually rose by 26% year-on-year to VND64 million (US$2,530) per square meter on average in the third quarter.
Analysts put down this paradox to the new units being concentrated in a few projects built by a handful of developers, lack of competition in the market, rising construction costs, and speculation.
Pham Duc Toan, CEO of real estate agency EZ Property, said when supply increased similarly one time a decade ago, prices went down because housing was launched across the city in a wide range of prices and by a large number of developers.
This year supply mainly consists of units at existing projects in the city’s western and eastern parts, where the average prices are already high.
The lack of competition in the market means it is difficult for prices to come down, Toan said.
Concurring, Nguyen Hoai An, senior director at CBRE Hanoi, said developers price their new projects by benchmarking them against the average rate in the area, making lower prices unlikely.
The director of a development company based in western Hanoi said new apartments sell well despite the high prices, giving businesses even less reason to lower their rates.
Each new project is priced higher than the last, and so the average price levels shot up in the western and eastern areas where many new projects have been launched recently, he noted.
The demand for apartments not only comes from housing needs, but also from investors looking for properties to park their money as other asset classes have not been performing well this year, he added.
Prices have also been driven up by speculators using strategies like listing their properties multiple times at higher prices each time.
Vuong Duy Dung, deputy director of the Ministry of Construction’s housing and real estate market management agency, said when the apartment market was booming earlier this year, some trading floors and real estate brokers would hike prices by 5-20% when advertising properties.
Le Hoang Chau, president of the HCMC Real Estate Association, said developers also add to the speculation problem by repositioning projects initially planned in the low- or mid- priced range as high-end to maximize profits.
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Apartment buildings near the Ring Road No. 3 in Hanoi. Photo by VnExpress/Ngoc Thanh |
Nonetheless, some degree of price growth is warranted as construction, materials, labor, finance, and management costs have all risen over the last two years, he said.
According to the ministry, the national housing construction cost index increased by nearly 3% last year and 13% from 2020.
Experts said a resolution the government recently submitted to the National Assembly contains several policies that, if approved, could resolve legal issues hampering existing projects and allow more types of land to be used for commercial housing development, potentially making housing cheaper.
But authorities need to find measures to prevent real estate brokers and speculators from inflating prices for profits, Chau added.
