Is a new wave of land plots on the way after apartment buildings?

Big surge in apartment prices

Recently, the heat of the real estate market could be distinctly felt through the bustling movement and the 'fever' of the apartment segment at the beginning of 2024, with a continuous race in terms of price levels. The price of apartments has increased significantly in just a few months, with both new primary projects being launched and older projects being handed over.

According to Batdongsan.com.vn, the average asking price for apartments in Hanoi is currently around 46 million VND/m2, in some places going up to 70-80 million VND/m2, nearly reaching the levels of Ho Chi Minh City; compared to 2018, the average price increase of Hanoi apartments has reached 70%.

With the market's heat, real estate brokers are also returning to strong activity, especially in some newly launched or selling apartment projects. The number of apartment listings has visibly increased on various real estate sales websites and social networks of brokerage units with offers like 'if you don't buy now, the price will increase further', 'you won't be able to buy at this price anymore'.

According to polls, liquidity in the first quarter of the Hanoi apartment market was 'bustling'. Some brokerage units have reported excellent liquidity in freshly launched and secondary projects of big residential complexes.

Assoc. Prof. Dr. Dinh Trong Thinh said that in the context of the ongoing supply constraint, apartment prices will continue to rise and then fall when they hit actual purchasers' tolerance thresholds.

However, the continued high prices are reducing the investment yield for rentals, while if bought at peak prices, the profit margin is not much left.

Investment funds shifting direction

In reality, although not as heated as the apartment segment recently, the land plot and low-rise segments are becoming attractive again to investors in the context of a strong real estate market recovery.

According to journalists' surveys, in Hanoi, in the suburban districts like Hoai Duc, Long Bien, Dong Anh, etc., the demand for land plots priced around 2 billion VND has significantly increased. Along with that, the segments of villas and adjacent houses in suburban districts of Hanoi also recorded strong price increases. Projects such as Vinhomes Ocean Park 2 (Gia Lam), Solasta Mansion (Duong Noi) have seen price increases of 1-2 billion VND/unit in the first quarter. Even in the secondary market for villas in the areas of Nam An Khanh, Bac An Khanh, Duong Noi, there has been a price increase of 10% in the past few months.

Along with Hanoi, certain provinces with significant urbanization and infrastructure investment, as well as stable economic development, such as Hai Phong, Quang Ninh, and Vinh Phuc, are experiencing a resurgence of demand in land plots and low-rise urban products. Investors are particularly drawn to urban property plots, villas, and shophouses in core metropolitan districts that have a defined legal status.

Analysts assess that the land plot market has begun to 'thaw', and the interest level will increase by the month. The director of Batdongsan.com.vn, Mr. Dinh Minh Tuan, sees the current developments in the land plot segment as showing the return of the 'king' investment channel. According to this expert, the recovery of the land plot market is driven by three forces: first is the cyclical nature - post-Tet investment demand increases; second is the adjusted decrease in land plot prices compared to before, making investors consider the right time to invest; third is the impact of 3 new Laws effective from 2025 - investors want to seize the opportunity of land prices increasing after the laws take effect.

Mr. Nguyen Van Dinh, Vice President of the Vietnam Real Estate Association, Chairman of the Vietnam Real Estate Brokers Association, assesses that land plots and low-rise products are becoming attractive again as the market recovers, also due to the mindset of 'land is gold', the desire to own property, and the widespread demand for asset accumulation.

Moreover, land plots and low-rise houses can keep their 'kingdom' on the market because this segment always 'wins the favor' of investors in many aspects, beyond the solid legal factor satisfying the demand for asset accumulation, centrally located products in large urban areas also offer high profit potential in the future if investors buy at the right time. According to Mr. Dinh, with equivalent finances, urban land plots, low-rise products in good locations, and transparent legal status still attract more investment interest than apartment products.

Additionally, experts also note that the early recovery of the land plot and low-rise market is driven by two factors: the wave of anticipation for changes from 3 new Laws effective from 2025 and the 'saturation' of other investment channels.

Specifically, the amended Real Estate Business Law and the amended Housing Law will have a significant impact on the land plot market from 2024 onwards. Tighter regulations on land plot division are a hot topic, with predictions that the supply of divided land plots will significantly decrease after 2025, but the demand for land plots is hard to decrease in the long term due to the Vietnamese preference for this type of asset. When supply is low and demand is high, land plot prices will trend upwards. Many investors want to seize this trend will start hunting for land plots before the new law applies.

'Only land plot products with legal advantages, good locations, near infrastructure or industrial or tourist areas, which can exploit commercial value, will be sought after by buyers and have the potential to increase in price in the future. However, the price increase of land plots cannot be as strong as during the peak period and unlikely to see 'shock' price increases as seen in previous years', Mr. Dinh Minh Tuan affirms."