Apartment sale volumes were affected by Covid-19 in 2020 but prices slightly increased. Excessive price fluctuations are unlikely in 2021. Regional and international containment of Covid-19 is forecast for most of the year.
Ha Noi apartment primary selling prices moved up a little in 2020 after indications of recovery toward year end. Our data from Q4/2020 shows primary supply of 27,100 apartments was up 1% quarter of quarter (QoQ) but down -19% year on year (YoY). Of which, new supply of 5,500 units was from ten new project launches and eight next phases of existing projects. Average primary selling prices increasing by around 3% YoY were mainly influenced by performance in Grade B.
In 2020, Grade B represented around 66% of total apartment sales, with prices up by around 6% YoY. Several new projects launched in the East and The West of Ha Noi with unit prices over area and grade averages, but supply is not excessive.
Apartment performance in Grades A and C had little effect on the overall average price increase. In Q4/2019,although Grade C increased by up to 4% YoY, prices of released supply were below the market average. In Grade A, limited primary supply resulted in no significant price increases. Overall the market remained stable in a difficult year.
Apartment prices are primarily driven by land costs. Covid effects have seen project entries being held back, leading to increased costs of opportunity and initial investment. New or upgraded infrastructure coming online is a major driver of property values in the immediate area. The General Statistics Office reports when public investment increases by 1 percentage points (ppts), GDP rises by 0.06 ppts
Savills Hanoi Senior Director of Research & Advisory Services, Ms. Do Thi Thu Hang, commented: “The increase in apartment prices in 2020 is reasonable to a certain extent. In Q4/2020 all indices became more positive. The 6700 sales were up 27% QoQ. Absorption of 25% was up 5 ppts QoQ. This helped reinforce the belief investors had returned. However, sales were mainly from home buyers with few investment transactions”.
“Luxury apartment prices in Viet Nam are still comparatively low to those in the region. Prices are not solely dependent on land costs, infrastructure development costs, landscaping, and construction costs, but are also highly influenced by supply and demand. Managing a sustainable real estate market and the economy to enable mutual development is vital. Incomes increase with economic growth, which requires a real estate market with extensive and diverse products available for everyone", Ms. Hang added.
Mr. Matthew Powell, Director of Savills Hanoi, commented: “In 2021, there will be no major changes in the apartment market. Ha Noi will not have the same supply shortage as Ho Chi Minh City. Positive changes are being seen in the quality of many projects, especially in mid-range housing. Infrastructure development will play an important role in "untying" supply by enabling development to expand into outer districts and provinces.”
“In 2021, forecast economic growth makes the prospects of a real estate bubble in the Ha Noi apartment market unlikely. Demand remains plentiful and prices remain under control. Some higher priced projects may have to reconsider overall selling prices and actual project conditions to reduce pressure at first launch. Regional and international containment of Covid-19 is forecast for most of 2021.”