The Gradual Disappearance of 1-3 Billion VND Apartments Over the Past Decade

More than a decade ago, owning an apartment in Hanoi on a budget of around 1 billion VND was entirely feasible. For example, Ms. Minh Anh's family purchased a new two-bedroom apartment of 75 square meters in the Xa La urban area, Ha Dong, for only 970 million VND. At that time, projects in areas such as Hoai Duc, Ha Dong, and Hoang Mai offered reasonable prices of approximately 13 million VND per square meter, fitting the financial capacity of most people. This period marked the golden age of affordable apartments, with accessible prices accounting for nearly 40% of the total market supply.

Between 2014 and 2016, the affordable apartment market in Hanoi and Ho Chi Minh City experienced a surge in liquidity as budget housing projects were continuously launched and quickly absorbed by buyers. In some cases, due to high demand, investors organized raffles to determine purchase rights. During this time, apartments priced at 1 billion VND were still quite common, providing buyers with options suitable to their finances. Projects like Van Phu, Song Nhue, The Spark, Xuan Mai Tower, Xa La, Kim Van Kim Lu, and HH Linh Dam were familiar names, representing stable options in both price and quality within the affordable segment.

However, since 2020, the Hanoi apartment market has witnessed a sharp decline in affordable housing supply, with apartments priced below 3 billion VND gradually disappearing. Today, with 1 billion VND, buyers can only afford half of a studio apartment in suburban areas. Even at the 3 billion VND mark, finding a two-bedroom apartment in new projects is challenging. In both the western and eastern districts of Hanoi, the price of even the smallest studio apartments has reached between 3.26 and 3.68 billion VND, underscoring the market's rapid transformation.

The scarcity of affordable apartments stems from several factors, including rising land prices and construction costs, along with prolonged legal issues affecting project development. As a result, affordable apartments are gradually vanishing, while luxury apartments priced from 60-120 million VND per square meter account for up to 70% of the total supply released since early this year. With rising land costs and increased project development expenses, developers are losing incentives to build affordable housing. Instead, they focus on the premium segment to secure profit margins and meet the demand of high-paying customers.

Ms. Nguyen Hoai An, Senior Director at CBRE Hanoi, pointed out that apartment prices only began to increase sharply from 2020, with a growth rate close to 100%. Before 2019, apartment prices in Hanoi only increased by an average of 10% per year. However, since 2020, the rate of increase has far exceeded all forecasts. The imbalance between supply and demand in the apartment market has made affordable housing nearly impossible for most people. Furthermore, financially strong real estate firms and foreign investors entering the market have placed substantial upward pressure on sale prices, leading to further escalations in apartment prices.

Many experts believe that with continuous increases in housing prices, affordable housing supply is unlikely to return in the near future. New projects launched this year mainly target large urban complexes with high prices, making affordable apartments seemingly absent from the market. It is expected that Hanoi will welcome about 50,000 new apartments over the next two years, but the premium segment will still dominate. This trend adds further difficulty for individuals with limited financial means, especially those seeking a stable place to live at a reasonable price.

Not only has affordable housing vanished, but even the mid-range segment, with prices between 2-3 billion VND, has become scarce and nearly non-existent in the market. At the beginning of 2022, two-bedroom apartments priced at around 2 billion VND began to dwindle, and by 2023, they had almost completely disappeared in Hanoi’s suburbs. According to surveys, primary apartment prices in Hanoi have reached new levels, with an average of about 46 million VND per square meter, meaning that a 60-square-meter apartment now costs no less than 2.8 billion VND. This has made the dream of home ownership increasingly distant for many people.

According to CBRE data, by the end of the third quarter this year, the average primary apartment price (excluding VAT and maintenance fees) reached 64 million VND per square meter, tripling over the past decade. However, most price increases occurred over the last three to four years, with a near 100% growth rate. Compared to Ho Chi Minh City, the increase in Hanoi is up to four times, reflecting the market's robust development and growing demand for housing. The perception that apartments are a depreciating asset has gradually changed as apartment values continuously rise, making apartment ownership an attractive investment channel, offering stable rental income that is more appealing than savings deposits.

Ms. Pham Thi Mien, representing the Vietnam Association of Real Estate Brokers (VARS), stated that the mid-range and premium apartment segments have continuously established new price thresholds in both primary and secondary markets. Recently, some projects priced up to 80-90 million VND per square meter have been well received. The main reason for this attractiveness is the disappearance of affordable housing, while demand for housing remains high. A portion of the population with sufficient financial resources is willing to pay for apartments in modern urban areas, where amenities and quality of life are assured.

Experts believe that Hanoi’s apartment market is entering a challenging phase, with only major developers capable of implementing large-scale projects targeting the premium segment. Projects with prices of 100 million VND per square meter have become common in Hanoi, and some projects are even reaching 200 million VND per square meter, on par with villa prices in suburban areas. The lack of affordable and mid-range apartments has created a significant market imbalance, presenting numerous challenges for middle- and low-income individuals seeking home ownership.

Although some research units predict a strong resurgence in Hanoi’s apartment supply starting next year, with about 50,000 new apartments launching over the next two years, primarily in the western and eastern areas, affordable housing will still be lacking. Premium projects are expected to continue making up approximately 70% of the new supply, leaving the dream of home ownership for many with limited financial means out of reach.