The prices of speculative villas in Hanoi have plummeted by 40%

Hanoi's villa investors facing financial difficulties due to the increasing interest rates are now offering discounts of up to 40% to attract buyers. In mid-2022, Loi purchased a 180-square meter villa near Ring Road No. 3.5 for VND32.5 billion, with VND11 billion of his funds and the rest from a bank loan, hoping to double his investment's value in two years. However, the real estate market went silent after two months, and he could not find a buyer even after reducing the price by 15%. Eventually, he sold the villa early this year for only VND23 billion.

Tien, a local real estate broker in the urban area surrounding the villa project Loi invested in, considers him lucky despite the challenging market conditions. Other villa investors in the same project have had to lower their prices by 15-30% and are still looking for buyers. Some investors have sold their villas at a loss of up to VND8 billion. Hinode Royal Park, urban area Brokers, now offers villas at prices 40% lower than last year, ranging from VND6-7.5 billion. Similarly, villa prices at other large-scale projects, such as Ha Do Charm Villas and An Lac Green Symphony, have fallen by 25-30% in the past year. Savills Vietnam, a real estate consultancy, reported that the average villa price on the resale market was VND22 billion in Q1 2023, 17% lower than the primary market prices. Speculators drive most villa transactions, and many villas have been abandoned.

Several investors have shifted their focus to the secondary market, with many turning to speculation. This trend is considered a significant contributor to the stagnation of the primary market, which has seen absorption rates drop to the lowest level in seven years.

According to Do Thu Hang, Senior Director of Advisory Services at Savills Vietnam, the villa market's liquidity is expected to improve, but only for properties bought as primary residences rather than investments. She believes completing the Ring Road No. 3.5 and Ring Road No. 4 projects will attract more buyers, with over 80 property projects located along these significant arteries.

Speculative real estate prices fall but find few takers

Over the past year, cash-strapped investors have been selling speculative real estate assets at significant discounts to cut their losses, resulting in a substantial decline in prices of 15-50%. This trend has affected all types of properties, including townhouses, villas, apartments, and land, and has been ongoing since the second quarter of last year.

However, liquidity has remained low since December, with many potential buyers adopting a wait-and-see approach. The housing prices meant for buyers' occupation have mainly remained stagnant, with a few cases of 5-7% decrease.

According to property analyst Le Quoc Kien, the market is in a slump, speculation has ended, and liquidity has plummeted. Furthermore, the availability of cheap money is over for now, and bank credit interest rates are high. The longer speculators hold onto real estate assets, the heavier the interest burden becomes. As a result, they have reduced prices by 30-50% but are still looking for buyers.

Senior consultant at advisory firm GIBC, Huynh Phuoc Nghia, expects the challenges to continue in the coming quarters as the market has shown no signs of recovery. Property developers have had to cut prices by up to 50% to try and sell speculative assets.

The property market is a significant contributor to GDP, accounting for around 11% and has a close relationship with industries that create many jobs. However, the market has been facing difficulties since last year due to tightened credit, excessive supply, and a lack of transparency, with many projects being suspended due to a shortage of capital. It has resulted in a buyers' market where sellers struggle with each other, lowering prices further. This situation is the price to pay for half a decade of rampant real estate speculation by individual and institutional investors.

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