Ha Noi’s apartment sector struggled under the two-month lockdown and transactions dropped significantly. However, the sector is expected to bounce back in the last quarter thanks to improved supply levels and absorption. As the CBD is tightly held and infrastructure improves in surrounding areas, Ha Noi will continue to see growth in its secondary hubs.
The pandemic influenced performance this quarter, and apartment sales decreased dramatically. With approximately 2,400 sales, transactions decreased by -50% quarter-on-quarter (QoQ) and -54% year-on-year (YoY). These low sales figures can partly be attributed to price increases caused by limited existing supply, higher development standards, infrastructure upgrades, and a recent steel price hike. While sales struggled, new supply levels increased by 101% QoQ and 3% YoY with over 3,200 units entering the market; 80% of which came from existing projects.
In Ha Noi, apartment prices have steadily increased for the last few years. For example, primary prices in Tu Liem have increased by 10% pa and by 17% pa in Cau Giay since 2017. Sixty-six percent of the city’s new supply in Q3.2021 was priced above US$1,500/m2, increasing by 32% YoY. Mr Matthew Powell, Director of Savills Ha Noi said, “Across the city and particularly in areas like the West, we are seeing great improvements in quality and infrastructure systems. Coupled with an increasing number of premium projects in the market, we will continue to see prices increase.”
It is no surprise that prices differ according to district and product offering. Hai Ba Trung, Ba Dinh, and Cau Giay districts have mostly Grade A stock and the highest prices of over US$3,000/m2. The second highest prices of US$2,000/m2 to US$3,000/m2 are in Dong Da and Tay Ho districts. Districts with mostly Grade C stock have average prices below US$1,500/m2. The most popular price range is between US$1,500/m2 to US$2,000/m2, which saw increased demand and accounted for half of all sales in 9M/2021. Most of these projects are in Tu Liem, Cau Giay, Long Bien, and Gia Lam districts.
Thanks to improved supply and the market reopening after lockdown, performance for the rest of the year will improve. Mr Powell commented, "Ha Noi is managing the pandemic well, which means the market will have room to move in the final quarter. We will continue to see good-quality projects with good positioning do well as they are still attractive to investors and end-users. Q4.2021 will fare better than previous quarters thanks to improved supply and absorption levels. We expect that primary prices will be stable and transactions will increase.”
This sector will see healthy demand and the continued expansion of secondary hubs in the future. Five suburban districts (Hoai Duc, Dong Anh, Thanh Tri, Gia Lam, and Dan Phuong) will become urban districts by 2025, and by 2023, these districts will hold 36% of the total city supply. These districts can support growth well thanks to their large available land banks. As Viet Nam continues to grow and display excellent economic performance, demand for apartments will be healthy. The main sources of this demand are Viet Nam’s middle class, which will reach 56 million by 2030, and Ha Noi’s rapidly growing urban population – 61% of Ha Noi’s nine million residents will live in urban areas by 2025.
Mr Powell said, "Decentralisation is a key trend, which is supported by improving infrastructure in the secondary hubs. The pandemic has impacted residential choices, and the growth of secondary hubs is ideal for increasingly price conscious buyers. These areas offer a good mix of products and locations, as well as affordable prices. Undoubtedly, we will see good future demand for apartments in Ha Noi. The principal drivers of this demand are Viet Nam’s growing (and increasingly urbanised) population, expanding middle class, and encouraging economic indicators.”