Ho Chi Minh City apartment price trend: Analysis and forecast in 2024越南文

In the fourth quarter of 2023, the apartment market in Ho Chi Minh City is "warming up" as many investors begin to launch new shopping carts, and transaction volume tends to improve compared to the second quarter of 2023. Currently, preliminary selling prices The level of the mid-end segment is from 1,500 - 3,500 USD/m2; For products in the luxury segment, primary selling prices are currently from 7,000 - 10,000 USD/m2

Apartment market in the city. Ho Chi Minh City is more exciting in the last months of the year as investors launch and start construction of many projects to stimulate market demand. Many projects from well-known investors in the market are also gradually being cleared of legal obstacles, restoring confidence from buyers and are expected to provide a large amount of supply in the near future. Infrastructure such as Metro 1, belt lines, and highways connecting to surrounding areas are also being focused on calling for investment and completion, in order to increase the ability to travel to existing and under construction projects. deployment.

Real estate values ​​increase due to falling interest rates

HoREA calculates that  house prices have increased  continuously since 2017 and are still "high" beyond the financial capabilities of middle-income people, urban low-income people, officials, civil servants, and public employees. state, armed forces officers, labor workers and immigrants. Because an affordable apartment costs 2 - 3 billion VND, it takes about 25 years for a person with a low average income to save about 100 million VND/year to be able to buy a house. In the current market context, apartment prices still remain high and the main reason can be transmitted through fluctuations in bank interest rates.

Specifically, falling interest rates have created a strong flow of investment capital into real estate, thereby pushing up the value of this industry. This influence is clearly reflected through two main aspects: capital flow and discount rate.

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Market price fluctuations according to Batdongsan.com's Market Overview document.

As for capital flows, bank interest rates play an important role in determining capital costs and mortgage interest rates. When interest rates decrease, capital costs also decrease, making it easier for capital to flow into the real estate market. This not only helps increase capital supply for projects but also boosts investment demand, thereby pushing up real estate values. On the contrary, when interest rates increase, the cost of capital increases, reducing access to capital and affecting both the supply and demand for investment in real estate. In particular, in situations where capital is limited, the loan-to-value ratio (LTV) tends to decrease, leading to a decline in both the amount of money and the value of leveraged real estate.

In addition, the discount rate and capitalization rate, important indicators in valuing the cash flows of investment projects, are also strongly influenced by current interest rates. Both indexes include a risk-free rate and a risk premium - the difference between the required minimum rate of return and the risk-free rate of return. When interest rates decrease, the discount rate and capitalization rate also decrease, thereby increasing real estate value. Conversely, rising interest rates will reduce both the discount rate and capitalization rate, thereby pulling down real estate values.

Trends over the years

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Real estate prices over time and future forecasts of the Ministry of Construction

Apartment supply decreased by 32% with 22,071 units from 126 primary projects launching sales. Open sale supply is mainly distributed in Ho Chi Minh City (concentrated in the East) and Binh Duong. Consumption decreased by 56%, reaching about 9,664 units, equal to 44% of primary supply. Primary consumption is concentrated in mid-range projects with prices ranging from 40 - 55 million VND/m2, with legal completion. The primary selling price level has not changed much compared to the beginning of the year. Meanwhile, secondary liquidity is still low, secondary prices decreased by up to 8% compared to the end of 2022, mostly in projects that are in the legal completion stage or have delayed construction progress.

According to DKRA, new supply is forecast to increase compared to 2023, fluctuating at 12,000 - 15,000 units; Concentrated mainly in Ho Chi Minh City with about 8,000 - 10,000 units, Binh Duong with about 4,000 - 6,000 units, Dong Nai and Ba Ria - Vung Tau with about 300 - 500 units/each locality, other provinces and cities continue to have scarce resources. new palace. 

The market in general still records a low absorption rate mainly due to the global economic recession and cautious psychology of buyers. However, investors who offer flexible and legally transparent payment plans will attract the attention of buyers. Due to the abundant supply of the Mid-end segment in the current primary market, along with the lack of primary supply from higher segments because investors are still waiting for positive signals, the primary selling price The average level this quarter recorded a decrease of 3% compared to the previous quarter, reaching about 3,168 USD/m2. However, the majority of primary projects still maintain their primary selling prices.

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In Ho Chi Minh City, M&A transactions are taking place in the apartment segment, creating positive results for the future supply of the market. With selling prices skyrocketing in the central and surrounding areas, buyers are looking forward to solutions for real needs such as developing social housing and developing projects in neighboring provinces at reasonable prices. Current primary selling prices in Ho Chi Minh City are fluctuating lowest at 1,175 (popular segment) to 10,000 USD/m2 (luxury segment) with a recorded absorption rate of about 50-65%.

Analysis of apartment rental prices in Ho Chi Minh City

Regarding apartment rental prices, in Ho Chi Minh City, luxury real estate segment rental prices continue to increase regardless of market developments, especially in areas with high and stable rental demand such as District 2, District 1.

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According to Savills' survey in 2023 at 30 Grade A and B projects, rental yields are stable year-on-year at 4.8% but the growth rate of asset value decreased by 1.9 percentage points year-on-year. remaining 2.9%/year. As a result, the overall profit from investing in apartments during the year decreased by 1.7 percentage points compared to the previous year. Despite the year-over-year decline, total returns are still higher than savings interest rates, which confirms that investing in apartments is still a profitable channel. In the short term, as the number of apartments delivered decreases and savings interest rates remain low, the rate of profit from rental is expected to increase.

Ms. Giang Huynh, Deputy Director of Savills Ho Chi Minh City Research and S22M Department, emphasized that in the next 3-5 years, it is expected that apartment supply will be scarce due to limited land fund and legal problems. Therefore, after a period of leasing, investors can expect to sell with a good profit. Although the profit rate from apartment rental is stable at about 5%/year, investment decisions are not based solely on profit rate. Cash flow from this rental is also considered a waiting period for the market to recover. The actual demand for buying apartments to live in Ho Chi Minh City and surrounding areas is still very large, according to the advice of Ms. Giang Huynh.