The price of apartments in Ho Chi Minh City is higher

Living in a 60m2 apartment, about 8km from Hoan Kiem Lake, with a market price of only 1.6 billion VND, Huyen's family could not help but "stunned" when surveying to buy a house for her husband and children to establish the careers. 

Find out on the classifieds pages, with the amount of 2 billion, Huyen can only buy an apartment with an area equivalent to her current apartment, but the location is about 13-14 km from the center of District 1.

Preliminary survey on online real estate sites shows that in Hanoi market, apartment projects priced at about 30 million VND/m2 are still quite a lot, while in Ho Chi Minh City it is scarce.

For example, a 3-bedroom apartment with an area of ​​81m2 in Thanh Xuan district, about 10km from Hanoi's old quarter, is for sale for about 2.5 billion VND. Meanwhile in Ho Chi Minh City, a number of projects about 13km from Nguyen Hue Walking Street area are for sale with the "softest" price of about 2.5 billion VND for a 2-bedroom apartment, an area of ​​about 65m2. 

According to a study by Savills Vietnam, apartment prices in Hanoi are about 30% lower than in HCMC.

Statistics of the Ministry of Construction on housing and real estate market in the second quarter of 2020 show that, in Hanoi, apartment prices increased by about 0.16%, individual houses increased by about 0.01% compared to the previous quarter. January 2020. Meanwhile in Ho Chi Minh City, the price of apartments in the second quarter increased by about 0.25%, while the price of individual houses increased by about 0.15% compared to the beginning of the year.

The director of a real estate business in Ho Chi Minh City said that one of the reasons why apartment prices in Ho Chi Minh City continuously escalated was because the market experienced many fevers, house prices were pushed up.

There is also a factor that the demand for housing is very high, while the supply of houses has dropped seriously due to legal bottlenecks. In addition, the high price of apartments in Ho Chi Minh City also has the impact of luxury apartment projects with selling prices up to more than 200 million VND/m2.

CBRE Vietnam's third quarter report said that in the first nine months of 2020, the Hanoi market recorded 10,700 new units for sale, down 61% year-on-year. The selling price on the primary market in the third quarter of 2020 was averaged at $1,325/m2 (about VND 30.7 million/m2), down 4% year-on-year due to the proportion of affordable projects opened for sale in the first quarter of 2020

Meanwhile, in Ho Chi Minh City, 9,214 apartments were offered for sale, 57% lower than the same period last year. The average selling price in the primary market was at $1,966/m2 (about VND 45.5 million), up 1% qoq and 6% y/y.

According to economist Dinh The Hien, the difference in house prices in the two largest cities in the country has been going on for many years. And the fact that the price of apartments in Ho Chi Minh City is higher than in Hanoi is also reasonable in fact, because apartments in Ho Chi Minh City have better rental potential. In other words, the rental business in general and apartments in particular is better in HCMC.

Mr. Hien said that apartment buyers do not expect to increase land prices. If you buy a house in Hanoi's Old Quarter, although it is possible to rent a house at a low price, it is believed that the price will increase because the supply is limited.

“But with apartments the story is different. The apartment is simply for living and renting. When the rental income is not commensurate with the investment price, the selling price will be difficult to increase,” said Mr. Hien.

In fact, the total population of HCMC is still larger than Hanoi. Ho Chi Minh City has about 13 million people living and working, so the demand for housing in HCMC is much higher. In addition, the number of foreigners working in Ho Chi Minh City is also large and there is a need to rent larger luxury apartments.

The investors move to Hanoi?

According to Savills Vietnam, in the eyes of real estate investors, if Ho Chi Minh City is a market of great interest, then Hanoi has a distinct attraction thanks to the rapid development of infrastructure with the subway system, bridges and roads around the city.

This market research unit also said that there is a wave of investors and large investors from Ho Chi Minh City moving to the capital market. These investors are mostly "big guys" who have experience in project development, with more excitement and experience than investors from Hanoi.

Ms. Hoang Nguyet Minh, Deputy Director of the Investment Advisory Department at Savills Hanoi, said that investors in Ho Chi Minh City have strengths in developing a variety of housing business models.

The fact that large investors, both domestic and foreign, are concentrated in Ho Chi Minh City such as Capital Land, Mitsubishi, Nam Long, Masterise, helps to improve the competitiveness and product quality for projects here.

Some people believe that in the Hanoi market, investors from Ho Chi Minh City do not have many advantages. Most of the housing projects here are invested by investors from Hanoi. Meanwhile, in Ho Chi Minh City, increasingly scarce land fund has triggered a wave of people moving from Ho Chi Minh City to Hanoi in search of new opportunities.

However, according to Mr. Dinh The Hien, the phenomenon of investors moving to Hanoi is not necessarily because of the story of the land fund. The proof is that Ho Chi Minh City still has a large land fund in areas such as District 9, Binh Chanh, Nha Be... suitable for developing high-class and mid-range apartments.

The main reason, according to Mr. Hien, is legal issues. Many "attractive" land plots are subject to legal entanglements.

“Ho Chi Minh City's land fund is still very large, but many places are entangled in public land, legal land is not clear. Meanwhile, real estate businesses can't wait. They have to find new opportunities, so where there is business potential, they do it. Therefore, when the Hanoi market has clean and legal land, businesses will jump in, not Ho Chi Minh City, which runs out of land," emphasized Mr. Hien.

Evaluating the attraction of the real estate market in two big cities for investors, Mr. Hien said that if you want to know where real estate is more attractive, you have to look back at the economic attraction. Hanoi has the advantage of being the capital, which is considered the cultural and administrative center of Vietnam. And Ho Chi Minh City is the economic locomotive of the country.

“These two markets have their own charms. The problem is how investors can meet the needs of the people is the key issue. Because the needs of investors are borderless, people in Hanoi can still invest in Ho Chi Minh City and vice versa”, Mr. Hien concluded.

Talking more about the challenges for real estate businesses in Ho Chi Minh City when "Northern progress", Ms. Hoang Nguyet Minh said, the biggest difficulty of investors from Ho Chi Minh City. Ho Chi Minh City is looking for potential projects and cooperation opportunities with landowners in Hanoi.

To overcome that, investors are offering flexible transaction structures, promoting the advantage of creativity in project development to encourage cooperation opportunities with investors in Hanoi.

Previously, investors required a dominant rate of over 76%, now may have to reduce it to 51% to have a chance to set foot in the Hanoi market.

Ms. Do Thi Thu Hang, Director of Research and Consulting Department of Savills Hanoi, said that investors from Ho Chi Minh City will have many things to consider. Customer psychology is one of the big challenges, because they may not have a thorough understanding of the demand and the Hanoi real estate market, specifically about the price.

“In Ho Chi Minh City, projects in the city center can be up to and over 10,000 USD/m2. However, in Hanoi, such projects are few and difficult to sell. Therefore, despite having a lot of experience in residential real estate development, understanding the Hanoi market to achieve success is a challenge for investors," added Ms. Hang.

See the apartment projects on sale in Hanoi at https://bdstanlong.com/buildings/