Hanoi Real Estate Market Rebounds

9:57:15 AM | 2/1/2021

With the effective control of the Covid-19 pandemic and new policies in the Investment Law, the Construction Law and the Real Estate Business Law, the real estate market in Vietnam in general and Hanoi in particular showed signs of strong recovery and development, including housing and retail spaces, in late 2020 and early January 2021.

Housing segment regains momentum

In 2020, Hanoi saw approximately 18,000 new apartments, down 52% year on year, marking the lowest sales opening in a year since 2015, the time when the market strongly recovered. However, in the fourth quarter of 2020, new condominium launches increased after the nine-month quiet period with 7,200 units, equivalent to launches in the fourth quarter of 2019. Specifically, the eastern region of Hanoi accounted for 44% of new launches in 2020. New supplies from this area mainly came from large urban projects such as Vinhomes Ocean Park and EcoPark.

By market performance, approximately 18,500 units were sold in 2020. Domestic buyers became the key buyers amid interruptions in international flights. Selling prices on the primary market in the fourth quarter of 2020 hit the record of US$1,412 per square meter (excluding VAT and maintenance fees), a year on year growth of 3%. High-end projects, first introduced in Gia Lam and Long Bien districts, set a new price level in the east of Hanoi. In addition, newly launched projects in urban areas throughout Hanoi offered higher prices than previous ones thanks to improved amenities and better connectivity.

According to CBRE, in 2021, the Hanoi housing market is expected to offer about 24,000-26,000 new units for sale; continue to expand strongly to new residential areas while developed areas will continue to upgrade their positioning. As a result, affordable projects are forecast to move further away from the Belt Road 3. The average selling price is expected to increase by 4-6%, driven by the launch of high-end projects in prime locations.

Mr. Vo Nguyen Phong, Director of the Hanoi Department of Construction, said the department submitted the Housing Development Program for 2021-2030, with a vision to 2045, and the Housing Development Plan for 2021-2025 to the Hanoi People's Committee. In 2021, Hanoi will focus on developing social housing projects, select investors for new projects, and review the land fund for social housing projects.

Positive retail spaces

Retail spaces were considerably affected by the Covid-19 pandemic. In Hanoi, retail spaces saw an increase in vacancy rates in both CBD (central business district) and non-CBD areas. In CBD, the vacancy rate rose by 12.9 percentage points year on year to 14.3%, the highest since 2011. At the same time, the vacancy rate in the non-CBD area went up 3.3 percentage points year on year to 12.3%. Most tenants went through this challenging time. The hardest-hit tenants, which had to close down their spaces, are fashion and accessories and food stores.

Mr. Vo Huynh Tuan Kiet, Deputy Director of CBRE Vietnam, said: “In 2020, the retail sector is one of the sectors most affected by the Covid-19 pandemic. Vietnam's total service revenue and consumption was only about 2.6% in 2020, much lower than the 11.8% growth in 2019. Notably, townhouses in CDB areas such as Ba Dinh, Dong Da and Ho Tay districts produced much lower profitability than other regions and than previously. Supply restrictions and declined profitability greatly affected investors' sentiment”.

However, successfully containing the Covid-19 pandemic, the Vietnamese retail market has regained momentum. In the fourth quarter of 2020, the opening of two retail projects - International Center (upgraded) and Vincom Mega Mall Ocean Park, offered additional 41,000 square meters of retail space for lease in Hanoi. As a result, by the end of 2020, Hanoi's retail supply reached 1.05 million square meters, an increase of 4% over 2019. Average rental rates (first and ground floors, excluding VAT and service charges) in CBD area added 9.7% year on year to US$107.7 per square meter a month as retail spaces in prime locations were rented at higher prices. Besides, non-CBD rental rates saw a slight growth of 1.3% to US$24.5 per square meter a month. Pharmaceutical stores increased by 65% year on year, from 26 to 43 stores in Hanoi.

According to CBRE experts, in the next three years, the retail space market is expected to have more than 300,000 square meters of new retail space for rent, all from non-CBD areas. Three large-scale projects are scheduled to open, Lotte Mall Hanoi, Aeon Mall Giap Bat and The Manor Central Park, to meet the shopping and service needs of residents in the north and south of the city as well as their neighborhoods. This is a new impetus for the development of the retail space market. Although the entry of new brands is limited by quarantine barriers, some of the existing brands will continue to expand their presence, such as Uniqlo and MLB with new stores, while The Coffee House and Kichi Kichi introduced new stores with unique themes to attract customers.

By Nguyen Mai, Vietnam Business Forum