Northern Vietnam property: New supply is still scant

Vinhomes Co Loa project

>> What are the prospects for the HCMC residential property market?

Lacklustre in condo transaction

Both new releases (-22% qoq to 3,640 units) and sales volume (-39% qoq to 3,624 units) fell dramatically in the 3Q22 Hanoi condo market. The high-end and mid-end sectors made up 65% and 34%, respectively, of the overall sales volume. Take-up rate fell to 99% in 3Q22, a 23% points qoq decrease.

After an increase of 12.3% ytd in 1H22, condo primary prices in the mid-end sector decreased for the first time in three years (-3% qoq). While the others saw a 1% to 2% qoq increase in 3Q22. In 3Q22, the average primary price of a condo in Hanoi increased somewhat, 1.3% qoq, to US$1,896 psm.

In Hanoi, the new supply of landed property increased 115% QoQ to 489 units in 3Q22, however sales volume drastically decreased 52% QoQ to 299 units. Take-up rate was 61% (down from around 300% in 1H22) due to weak housing demand.

According to Ms. Nguyen Cam Tu, analyst at VNDirect, primary prices of landed properties declined by 10-15% qoq in both townhouse and villas in 3Q22, after a major spike of 10%/30% ytd in 1H22, respectively.

>> Headwinds for property outlook

New supply from VHM

The two new projects by VHM will help stabilize the supply of new condos in Hanoi starting in 2023F. (c.20,000-22,000 units). “On account of the weak housing market attitude, we anticipate the take-up rate to reach c.90% (-13.5% pts yoy), which translates to 18,000–20,000 sold units in 2023F. Expect to see more promotional activities for non-bank loan homeowners to boost demand amid rising mortgage rates and restricted credit room as the condo primary price could modestly decline 3-5% year over year”, forecasted Ms. Nguyen Cam Tu.

The launch of townships in 2023F will continue to influence the new availability of land for sale. In 2023F, new supply is expected to remain stable at 2,000–2,200 units, driven mostly by the opening of new megatownships such Vinhomes Wonder Park and Vinhomes Co Loa as well as the subsequent phases of townships like Hinode Royal Park and An Lac Green.

“Notable developers' new project launches could still experience strong take-up rates in 2023F thanks to consumers who buy ahead of interest rate increases and use real estate as an inflation hedge”, said Ms. Nguyen Cam Tu.

The 9M22 debuts of Vinhomes Ocean Park 2 & 3 may put Hung Yen in the spotlight. In 2023F, Ms. Nguyen Cam Tu expects Hung Yen's average primary real estate prices to continue rising faster than those in Hanoi due to Vinhomes' high-caliber developments and the city's accelerated infrastructural development. As a result of the opening of new industrial parks like Pho Noi A IP, Thang Long II IP, Yen My II IP, etc., she also anticipates a strong housing demand for experts and engineers in Hung Yen over the course of the next two to three years.

With the introduction of two new township projects in Hanoi, Ms. Nguyen Cam Tu predicts that VHM will dominate the Northern Vietnam real estate market in 2023F. The Manor Central Park and Louis City Hoang Mai, among other notable project launches with infrastructure development (such as Ring Road 3 and the upcoming next phase of Ring Road 2.5 in Hoang Mai district) could benefit.