Speculation a factor behind skyrocketing housing prices in major cities: ministry

A corner of Hà Nội. Housing prices in major cities including Hà Nội and HCM City keep increasing, making homes unaffordable to a majority of city residents. VNA/VNS Photo Tuấn Anh

Speculation and manipulation are among factors which have inflated housing prices in major cities recently, in addition to increases in land-related costs and limited supply, according to the Ministry of Construction.

The ministry’s statistics showed that in major cities including Hà Nội and HCM City, apartment prices continued to increase in the third quarter of this year by around 4-6 per cent, or 22-25 per cent from the beginning of this year. In some areas, the increases were as high as 40 per cent over the previous quarter.

There are almost no apartments being supplied with selling price below VNĐ25 million (US$986) per square metre. The market only saw the supply and transactions of apartments with prices from VNĐ25-50 million per sq.m, the ones most in demand, priced at VNĐ50 million or higher.

In Hà Nội, the Zurich in Vinhomes Ocean Park in Gia Lâm District has a price of around VNĐ46-55 million per sq.m, Limi Prestige in Nam Từ Liêm District is from VNĐ69 million, The Ninety Complex in Đống Đa District VNĐ60-75 million, The Sapphire – Vinhomes Smart City in Nam Từ Liêm District VNĐ47-67 million, and Viha Complex 107 Nguyễn Tuân in Thanh Xuân District VNĐ75-97.2 million.

In HCM City, Diamond Centery in Tân Phú District is selling for around VNĐ61-73.3 million, Stown Tham Lương in District 12 VNĐ29.8-43.5 million, Urban Green in Thủ Đức City VNĐ52-59.7 million, Glory Heights – Vinhomes Grand Park in District 9 VNĐ40-80 million, The Aurora Phú Mỹ Hưng in District 7 VNĐ88-90 million, and the Beverly Solari – Vinhomes Grand Park in District 9 VNĐ46.83-65.6 million.

The prices of villas and townhouses in projects with developing infrastructure in Hà Nội are also increasing, due to the cash flow of long-term investors, priced at around VNĐ160 million per sq.m, or up by three per cent over the quarter, and nearly seven per cent from the beginning of this year.

A housing project under construction on Nguyễn Văn Linh Street, District 7, HCM City. Increasing supply is critical to tackle the rise in housing prices. VNA/VNS Photo Hồng Đạt

"Given housing demand, the increasing trend of housing prices is inevitable," said Lê Đình Chung, general director of real estate company SGO Homes.

"However, a sharp increase in housing prices over a short period of time is unusual. The main cause for the skyrocketing housing prices is limited supply and high investment costs, causing investors to have higher expectations for profits."

Nguyễn Hoài An, director of CBRE Hà Nội, said this was almost the first time ever the Hà Nội apartment market saw rapid increases in prices over such a short period.

She added that over the past decade apartment prices in Hà Nội had increased by an average of five per cent per year, but started to increase rapidly from 2022.

According to the Chairman of the Việt Nam Association of Real Estate Brokers (VARS), Nguyễn Văn Đính, the recent increases in housing prices in Hà Nội are unusual and unreasonable, especially in the context that the domestic economy, the market and incomes have not recovered. This phenomenon could be due to the impact of so-called “interest groups”.

“Housing prices are skyrocketing but there are few transactions. This can be a trick with a purpose,” Đính said.

"Speculation and manipulation are inflating housing prices with a shortage of supply to blame. In recent years, the market has not seen any new projects. The housing supply is both in shortage and of poor quality, coupled with an imbalanced housing product structure.

“It is not a good sign for the real estate market. Unreasonable housing prices will bring many consequences, including rising investment and production costs and undermining competitiveness.”

Economist Đinh Thế Hiển said that there was no market in which buying is winning, and questioned why prices kept increasing in a quiet market.

In its most recent report, the Ministry of Construction has pointed out that the increase in housing prices is partly because of the rising land-related costs, coupled with the impacts of the new land price frame.

Specifically, land use right auctions in some areas saw winning bids many times higher than the initial prices due to weak management, creating room for investors to collude with each other to pay high prices then abandon the deposits after winning the bid with an aim of establishing a virtual price level in the area to make a profit.

This will push up land and housing price levels, as well as property development costs, meaning that housing supply will fall.

Speculation and manipulation are also inflating housing prices with individual brokers and speculators taking advantage of the crowd’s lack of understanding to make a profit.

The ministry said that these were mostly individuals operating as freelancer brokers without certificates. They colluded to push up prices higher than the actual values to manipulate the market, causing damage to buyers and impacting the transparency of the real estate market.

The market also had a severe shortage of affordable homes for low-income earners in major cities as developers still faced difficulties in legal procedures, site clearance, credit access and corporate bond issuance.

It would take time for the Law on Land, the Law on Housing and the Law on Real Estate Business to work in reality and remove these roadblocks to unlock resources for housing development, the ministry said.

Furthermore, the recent fluctuations in the stock, bond and gold markets had led investors to move cash into the property market, as a prospective safe haven.

The ministry said that a combination of solutions must be implemented to remove the difficulty for the real estate market and promote its healthy and sustainable development, in which the focus will be on boosting supply.