Ho Chi Minh City's New Apartment Liquidity Drops 16%: Causes and Market Outlook

Ho Chi Minh City's New Apartment Liquidity Drops 16%: Causes and Market Outlook

In the third quarter of 2024, Ho Chi Minh City's real estate market continued to witness a significant decline in new apartment liquidity, with the absorption rate reaching only 39% of total supply, a 16% decrease compared to the previous quarter. This is a clear signal that the market is facing numerous challenges, from limited supply to cautious buyer sentiment in a fluctuating economic environment.

Q3 Transaction Overview

According to the market research report by Savills Vietnam, Ho Chi Minh City recorded only 1,915 primary apartments (newly launched by developers) successfully transacted in Q3, a decrease of 16% compared to Q2. The absorption rate stood at 39%, with newly launched units accounting for 62% of total consumption, and the remaining inventory from previous quarters making up the rest.

A notable point in Q3 is that 66% of the market demand was concentrated in mid-range projects, with selling prices ranging from 3 to 5 billion VND (approximately USD 130,000-220,000) per unit. This reflects the preference of homebuyers, mainly middle-class individuals, for reasonably priced apartments that match their income and payment capabilities.

The primary reason for the decline in consumption, according to Savills, is that the primary apartment supply in Q3 was significantly reduced. Only 4,871 new units were introduced to the market, down 13% from the previous quarter and a sharp 36% decrease compared to the same period last year. Among these, only 799 newly launched units were recorded, a 30% drop compared to Q2.

Additionally, in Q3, several old projects that had been temporarily halted due to legal issues returned to the market, with a total of 545 units reopened for sale. However, this number was relatively limited compared to the actual demand.

Supply and Liquidity Decline

The reduction in supply not only affected the number of successful transactions but also had a strong impact on market liquidity. DKRA Group reported similarly, noting that in July and August 2024, the total consumption of primary apartments in Ho Chi Minh City and the southern provinces reached only 980 units, with an absorption rate of less than 35%. Most of the transactions were recorded from projects in Binh Duong, which accounted for 54% of the total primary consumption in the market.

In Ho Chi Minh City, transactions mainly occurred in projects priced at around 45 million VND/m² (approximately USD 1,900/m²), showing that demand was concentrated in the reasonably priced segment that aligns better with the income of the city's residents. High-end and luxury apartments continue to face difficulties in finding buyers due to their pricing exceeding the purchasing power of the majority of buyers.

Developers' Incentive Policies

Given the lack of improvement in market liquidity, many developers have intensified their promotional policies to attract buyers. These policies include financial support, extended payment schedules, and even direct discounts to encourage potential buyers to return to the market.

For example, two projects in Tan Phu District have completed construction and launched for sale, offering an attractive policy where buyers only need to pay 15% of the total apartment value to receive the property. The remaining amount is spread over 24 months, reducing short-term financial pressure on buyers. This demonstrates the flexibility of developers in addressing inventory issues and accelerating transaction volumes.

Market Outlook

Despite the supportive policies from developers, market liquidity still faces challenges in the near term. Legal issues remain a significant barrier, especially for old projects that were halted or delayed due to incomplete legal procedures. Additionally, buyer sentiment plays a crucial role, with many potential buyers waiting for clearer signals from the market before making investment decisions.

Furthermore, credit policies and mortgage interest rates are important factors to consider. If banks continue to tighten credit, it will become more difficult for buyers to access financing, further limiting market liquidity.

Meanwhile, areas like Binh Duong, Dong Nai, and the outskirts of Ho Chi Minh City are emerging as attractive destinations due to their reasonable pricing and long-term growth potential. These areas are expected to attract significant investment in the coming months, contributing to a more dispersed supply and demand landscape across the broader real estate market.

Conclusion

The 16% drop in new apartment liquidity in Ho Chi Minh City in Q3 is a clear indication that the city's real estate market is facing a challenging period. Limited supply, cautious buyer sentiment, and ongoing legal and credit issues have created a difficult market environment. However, with promotional efforts from developers and potential government support, the market may gradually recover in the upcoming quarters if key issues are addressed.