Hanoi (VNS/VNA) - A recent survey by Savills found that gap ofproperty prices are narrowing between urban and surrounding areas as morefacilities are offered to compensate for outer locations.

The survey also said that property price and size are the key buyinginfluences.

For some apartment projects in My Dinh, the price has increased to 50-60million VND (2,128-2,553 USD) per sq.m.

Savills reported average primary prices in the third quarter of this year onthe Hanoi apartment market moved up 3 percent quarter on quarter (QoQ) and 10 percentyear on year (YoY) to 1,500 USD per sq.m. Secondary prices have been moreaffected by the pandemic and were down 1 percent QoQ to 1,157 USD per sq.m. 

The company said abundant planned infrastructure supports the long term outlookwith house prices set to benefit. From 2016 to date, primary prices haveincreased 5 percent per annum. As networks improve, supply will increasinglymove to newer and further out areas.

"The market remains price sensitive and uncertain with a lack of Grade Aapartment supply. There is robust demand for affordable products. Sustainedrecovery underpinned by long term economic and population growth is anticipatedonce COVID-19 is under control," said Do Thu Hang, Savills advisoryservices and research director.

She said that besides foreign investors, the Hanoi market is attractingdomestic investors, especially from HCM City.

There are some reasons for those investors coming to the Hanoi market. Firstly,investors are reassured by the legal framework.

Second, HCM City-based and foreign investors want to bring a new developmenttrend to Hanoi's housing market, which will create direct competition withlocal investors. These investors are all developers with extensive experiencein real estate development, Hang said.

Third, the developers themselves have abilities in many aspects to createaffordable products meeting investors' expectations.

However, the biggest difficulty of investors from HCM City is to look forpotential projects and cooperation opportunities with landowners in Hanoi.Therefore, they have flexible transaction structures to increase opportunitiesto cooperate with investors in the city. For instance, they could reduce theinvestment ratio to 51 percent instead of 76 percent as before.

"The success of investors from HCM City in Hanoi is still a bigquestion," Hang said.

Customer psychology is one of the major challenges for the property investorsfrom HCM City because they may not understand the market demand. In HCM City,prices of projects in the city centre can be up to 10,000 USD per sq.m and evenhigher. However, Hanoi has few property products with that price and it isdifficulty to sell them.

Therefore, despite having a lot of experience in residential real estatedevelopment, understanding the Hanoi market is a challenge for developers, shesaid.

According to the Savills report on the Hanoi market in Q3, the apartmentsegment had about 3,100 units from four new launches, and the next phases ofnine existing projects were down to their lowest in five years at 50percent QoQ and 60 percent YoY. Primary supply of 26,800 units wasdown 8 percent QoQ and 9 percent YoY. Uncertainty is delaying projectlaunches. 

About 5,200 sales were down 3 percent QoQ and 44 percent YoY. Grades B and Caccounted for almost all sales. Demand has eased under a lack of newsupply and high-priced inventory.  

Savills forecasts in Q4, approximately 9,980 units from one existing and 11future projects will enter the Hanoi market, with Grade B continuing todominate. Leading future suppliers will be Gia Lâm District with 38 percent ofsupply and Tu Liem with 37 percent. 

Urbanisation, strong population growth and shrinking households are all drivingthe solid housing demand, Savills said./.