Urbanisation in Ha Noi is expected to rise from the current 49% to 62% by 2025 and 75% by 2030. However, future apartment supply could fall short of the required units. Developers continue to struggle with securing funding, and inflation and high-interest rates pressure performance.
Q1/2023 Performance
In Ha Noi, primary stock of 19,483 units dropped by -4% quarter-on-quarter (QoQ). New supply of 2,040 units came from two new projects and the next phase of two existing projects, decreasing by -30% QoQ and -27% year-on-year (YoY). The average primary asking price of VND 52 million/sq m net sellable area (NSA) was stable QoQ and improved by 22% YoY.
While demand for affordable products remains high, Grade C stock is limited. Grade B stock had the lion’s share of stock. Ninety-two percent of the West’s stock was Grade B. It will also have a 60% share of future supply until 2024.
Urbanisation will support demand in the future. Urbanisation in Ha Noi is forecast to reach 62% by 2025 and 75% by 2023, which means there will be demand for 426,700 new units. The Ha Noi Housing Plan aims for new housing of 33.2 million sq m NFA by 2025, equal to 29.5 sq m/person/NFA. The forecast demand and housing plan exceed the pipeline and there is a forecast supply deficit of 95,800 units.
Do Thu Hang, Senior Director, Advisory Services, Savills Ha Noi noted that rapid urbanisation will have a notable impact on the market, and the housing deficit could result in overcrowding. She said that the Government and authorities should prepare and implement the appropriate support mechanisms.
Limited new supply coupled with high primary prices at VND 52 million/sq m and a reduced handover volume may support a secondary price increase. From 2018 to 2022, average primary prices increased by 13% per annum (pa), while primary stock decreased by -14% pa. As of Q1/2023, average primary prices were 48% higher than secondary prices.
Ms Hang added: “From 2020 to 2024, handovers will decrease by -36% pa. This is likely to spur secondary demand. Buyers like secondary products because prices are more competitive, and they can be assured that the property has a sound legal standing. Products in the secondary market, even though they are used, are legally transparent and will attract demand.”
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Do Thu Hang, Senior Director, Advisory Services, Savills Ha Noi
Long-Term Outlook
Resolution 33 will help solve the challenges real estate is facing with a clear roadmap and solutions, and it is a mechanism to solve legal and capital challenges. According to Hang, recovery depends on solving legal issues, financing challenges and the availability of suitable products. She noted that the market is waiting for important legal changes, such as the amendments to laws on housing, real estate trading, land prices, and bidding.
While it will take time for the legal changes to be noticeable, they will be essential to recovery as they will boost transparency and efficiency and improve access to capital. From 2024 onward, approximately 86,500 units from 98 projects to enter, in which Grade B will remain the largest supplier. The new legal mechanisms could also boost developer and buyer confidence, which will have a positive impact on performance.
In 2023, Gia Lam and Dong Anh will become urban districts, which will support real estate development. Future satellite cities may also shift demand to Dong Anh, Me Linh, and Soc Son in the east and Hoa Lac and Xuan Mai in the west.
Conclusion
Savills Advisory Services teams deliver expert insights and objective metrics that support informed real estate decisions. Contact Hang for more information.
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