Lack of budget housing challenges Hanoi property market

A lack of low-cost housing projects continues to be a major issue of the Hanoi property market in 2022, as most of those which will be completed in 2022 or open for sale are mostly of mid and high-end segments.

Data from the real estate website batdongsan.com.vn suggested the average prices of new apartments for sale in 2022 are from VND30 million (US$1,311) per square meter onwards, which target customers of middle to high-income groups.

A housing project in Hanoi. Photo: Doan Thanh

These include the Park Home project (Cau Giay District) from VND38-42 million per square meter; The Nine (Cau Giay) with those priced at VND42-50 million; Trinity Tower (Thanh Xuan District) VND38.5 million; Mipec Rubik 360 (Cau Giay) VND48-53 million.

After a difficult period of struggling with the Covid-19 impacts, Hanoi’s real estate market has seen positive signs over the recovery and growth prospects.

However, future sources of supplies would mostly be concentrated in suburban districts, including Hoai Duc, Dong Anh, Thanh Tri, Gia Lam, or Dan Phuong.

“We see a shift in investment trend to districts surrounding the downtown of Hanoi, due to the high investment cost and low rate of return in the metropolitan area,” Senior Director of Advisory Services at Savills Hanoi Do Thu Hang told The Hanoi Times.

“Investors are looking for business opportunities in rural districts and even of neighboring cities/provinces to Hanoi such as Hung Yen, Bac Ninh, Quang Ninh, or Haiphong,” she added.

While the move may partly relieve pressure from rising housing prices in downtown Hanoi, the imbalance of supplies has distorted the supply and demand.

A representative of the Department of Housing and Real Estate Management under the Ministry of Construction admitted the lack of social housing projects or budget commercial houses, which poses a stark contrast to an abundant supply of luxury housing in Hanoi and Ho Chi Minh City.

“This could lead to an unstable development of the real estate market, especially as mid-and high-priced housing projects are making up 90% of the supply in the market,” he added.

A national housing development strategy for the 2021-2030 period, with a vision to 2045, sets the goal of ensuring sufficient supply of affordable houses for low and middle-income groups, seen as a key factor for the market’s sustainability.

Under current regulations, the Government has now given greater authority to provinces/cities in licensing housing projects. As such, only projects of up to 300 hectares or in residential areas of over 50,000 people would need approval by the prime minister.

Vice Chairman of the Hanoi Real Estate Club Nguyen The Diep said simplified procedures would speed up the housing approval process, but called for drastic measures from local authorities to address the imbalance in housing supply.

“There should be a halt or limit the issuance of construction licenses for luxury housing projects, and give priority to budget ones,” Diep told The Hanoi Times.

“A strict process from the beginning is the key step to fix the current imbalance in the real estate market,” he added.