The shortage of supply for a long time is likely to cause real estate prices in Hanoi to increase slightly in the short term.
The project "stood still", the supply decreased
For four consecutive quarters, from the middle of 2018 to now, the Hanoi real estate market research reports of Savills, CBRE, JLL have all recorded a decline in new supply. According to Savills, in the first 6 months of 2019, only 6 new apartment projects entered the Hanoi market and 11 old new projects launched, providing about 6,600 units, decreasing 32% QoQ and 33% by year.
CBRE also said that in the second quarter of 2019, Hanoi market had only 6,400 apartments for sale, but 98% of apartments were in the mid-end and affordable segments. That means, Hanoi real estate market is now in danger of facing the shortage of high-class and luxury apartments.
Previously, JLL's Hanoi real estate market report also emphasized that, after a period of strong growth, the supply from newly launched projects tends to slow down. The number of launches in the second quarter of 2019 reached 5,900 units, nearly half of the previous quarter's supply, mainly from the next phases of existing projects. This is the lowest level recorded since the market recovered in 2014. The majority of newly launched projects are of small scale (less than 500 apartments).
JLL assessed that tightening of high-end real estate credit along with the limited land bank in the CBD resulted in the lack of supply of apartments, especially high-end and luxury segment in the next few years.
One of the reasons for the new supply not only in Hanoi but also in Ho Chi Minh City and Da Nang "paralyzed" in recent years is the review of local legal procedures by local authorities; a series of projects and real estate investors were inspected, causing the local authorities to suspend new grant or postpone project adjustment.
Ms. Duong Thuy Dung, Senior Director of CBRE Vietnam commented, the review of land fund and tightening licensing of new projects in big cities like Hanoi and Ho Chi Minh City have strongly influenced the release of the investors. Accordingly, from now until the end of the year, the market will continue to witness short-term supply shortages.
“Although the review makes supply in the market scarce, I think this is really necessary. After a few years, the apartment market has grown too hot, the quality of the project as well as the apartment are affected, the review, in a certain aspect, is positive for the market” Ms. Dung said.
According to Mr. Nguyen Quoc Hung, Head of Credit Department of Economic sectors (State Bank), real estate business is one of the areas with great risks, but does not mean restricting lending. The State Bank's risk restriction means selecting effective investment projects and capable investors.
Many businesses said that the regulation of reducing the ratio of short-term capital for medium and long-term loans in the Draft Circular replaces Circular No. 36/2014/TT-NHNN stipulating limits and safety ratios in The operation of credit institutions and foreign bank branches has greatly affected the real estate sector, making it difficult for investors to implement new projects.
In this regard, Mr. Hung asserted that this provision was aimed at rectifying the imbalance of real estate investors. From the actual operation of the business, explaining the causes of supply shortage, especially projects in the high-end segment, Mr. Nguyen Vinh Tran, General Manager of MIKGroup said: “After the focus period for the segment. On average, many developers now recognize the potential and growing demand of the high-end segment, so the number of projects starts to increase rapidly. However, at the fastest, it takes 6 months to a year, the number of high-end projects to be launched to the market”.
Price will increase slightly
According to statistics from the Vietnam Association of Real Estate Brokers, from the beginning of the year until now, the supply of real estate has tended to decrease, especially in Hanoi and Ho Chi Minh City. Total housing supply in Hanoi decreased by 25% compared to the same period in 2018, transaction volume also decreased by about 28%. In Ho Chi Minh City, the level of decline was even stronger, with the total supply decreasing by nearly 50%.
Mr. Nguyen Manh Ha, Chairman of Phu Quy PR and Urban Development Company Limited, said that given the current real estate market situation, in the last months of 2019, it is difficult to have new supply. Accordingly, real estate prices may increase slightly due to lack of supply.
In general, the market will continue to be in shortage of supply and it is likely that prices will be pushed up, but according to Ms. Duong Thuy Dung, the last 6 months of the year was the most suitable time for real estate buyers to live, because products marketed as "clean products" had been scrutinized for legal reasons. Besides, apartment prices, especially in Hanoi, were at a reasonable level after a period of hot growth.
Meanwhile, Do Thu Hang, Deputy Director in charge of Consulting and Research Services of Savills in Hanoi, said that in the last 6 months of 2019, the market will appear some good projects with higher prices than the present.
Currently, local governments have also realized the difficult situation of the real estate market due to lack of supply, so they are speeding up the review and inspection of projects. Although it is unclear when the shortage will end, but with the speed of reviewing the project, the supply of real estate will be improved in the near future.
“Currently, there is a decrease in the supply in real estate markets in Hanoi and Ho Chi Minh City. The two reasons affecting the current supply are: state agencies are cautious in approving new projects and real estate credit has been more strictly controlled from January 2019”, Mr. Nguyen Van Dinh, Vice Chairman of Vietnam Association of Real Estate Brokers.
According to Huu Tuan