Experts express concern over Hanoi over-supply

The capital may experience over-supply as new developments continue to add stock Photo: Duc Thanh

The market has seen high liquidity in many projects during the first three months of this year, especially in the mid- and high-end brackets.

According to Tran Ngoc Quang, general secretary of the Vietnam Real Estate Association (VNREA), the number of units sold in Hanoi during the first three months of the year shows a very positive trend, with 1,500 properties sold in January alone and 1,200 sold in February – a three-fold increase on the same period last year.

However, Quang warned that the market could soon be oversupplied, as there are a whole range of new projects being launched.

According to Quang, over the remaining three quarters of this year, there will be an additional 13,000 units launched on the Hanoi property market. Of those, the majority will be mid- to modestly-priced apartments with a value of less than VND2 billion ($95,000) per unit. “This number is quite big and could result in an oversupply situation again, especially in mid and low-segment apartments, which are now the most sought-after segments of the whole market,” Quang said.

Echoing Quang’s concerns, Pham Duc Toan, general director of EZ Vietnam Investment and Development Property JSC is also troubled by the incoming supply.

Toan said that the current stockpile in Hanoi was probably even higher than the VNREA estimate of 13,000 units, as many projects have not yet officially announced their products.

“Because the market has been in the initial stages of recovery, especially in the mid-level apartment segment, many developers have been advancing their investments in this segment, which has led to the stockpiling of mid-level units – so much so that they now occupy more than 50 per cent of the whole market,” Toan pointed out.

“Due to this huge supply, I am afraid that after a brief period of hot fever the market will turn back towards a cold fever again,” Toan said.

“As the market is now recovering, many developers are increasing their prices and speculators are coming back to the market again. Together with the more open loans available from banks, the market will likely be more risky in the time to come,” Toan said.

A range of projects launched for sale in Hanoi during the first months of the year caused the supply increase remarkably.

Real estate consultant Savills Vietnam said that between now and 2016 Hanoi will see more than 14,200 new units from 25 projects.

Vingroup, the biggest real estate developer in Vietnam, has rung in the new year with the sale of the second phase of its Times City project – known as Park Hill – with 7 apartment blocks.

After more than two years of preparations, GP Invest has begun its Trang An Complex, which will provide around 800 units to the market.