Affordable apartments "extinct" in Hanoi and Ho Chi Minh City real estate market
The Ministry of Construction's report on housing and real estate market in the third quarter said that the number of successful transactions of apartments and individual houses reached 38,398 products, an increase of 48% compared to the previous quarter.
Regarding prices, apartment prices in Hanoi continued to increase in both new and old projects, with new project prices increasing by about 4-6% quarterly and 22-25% annually. Apartment prices also increased, especially in some areas, increasing locally by about 35% to 40% depending on the location compared to the previous quarter.
The affordable apartment segment with a selling price of less than VND25 million/m2 has almost no transactions and products for sale. Mid-range apartments with prices from VND25 million/m2 to less than VND50 million/m2 still account for a high proportion of transactions and supply in the market. The rest are luxury and super luxury apartments (with prices above VND50 million/m2).
Research data from the Vietnam Association of Realtors (VARS) shows that the affordable apartment segment (priced under VND25 million/m2) - affordable housing - has become "extinct" in the past few years and is very difficult, or even impossible, to reappear in Hanoi and Ho Chi Minh City.
Specifically, statistics from this unit show that in the period of 2018-2023, not only did the quantity continuously decrease, the structure of apartment supply in the two special cities also became increasingly unbalanced. The structure of supply increasingly "leaned" towards the high-end and luxury segments. The proportion of newly opened apartment supply in the affordable price segment continuously decreased and officially "disappeared" in Ho Chi Minh City in 2021 and Hanoi in 2023.
In Hanoi, the proportion of newly launched affordable apartments reached 35% in 2018, decreased to 20% in 2019 and only 12% in 2020. In 2021 and 2022, the supply of affordable apartments in Hanoi continued to decrease, reaching only about 4% of the total supply of apartments for sale. To date, there are no more affordable apartments for sale.
In Ho Chi Minh City, since 2018, the proportion of affordable apartments has dropped sharply from 20% in 2018 to 0.5% in 2020. By 2021, the affordable apartment segment had disappeared in Ho Chi Minh City.
Dong Mo Dai Kim social housing project in Hoang Mai district, Hanoi (Photo: Ha Phong).
Over the past 9 months, the supply of apartments in Hanoi has seen a significant recovery. However, the imbalance between supply and demand has become more serious as approximately 80% of the supply of apartments for sale in Hanoi and Ho Chi Minh City are priced at VND50 million/m2 or more.
Apartment prices are continuously increasing and setting new levels, at high levels in both the primary and secondary markets, far exceeding the affordability and income growth rate of the majority of people.
The Ministry of Construction believes that currently, the real estate market is showing limitations and shortcomings, with signs of instability and unhealthyness emerging. Specifically, the structure of real estate products is unreasonable when the mid-range and high-end housing segments and tourism real estate show signs of surplus. Meanwhile, there is a severe shortage of social housing, housing for workers and commercial housing at affordable prices for low-income and middle-income earners.
"Real estate prices, especially housing and land prices, are constantly increasing and are higher than people's incomes. This makes it difficult for low-income workers in urban areas and industrial park workers to access and create housing. In Hanoi and Ho Chi Minh City, there are almost no apartments priced below VND25 million/m2," the Ministry of Construction stated.
According to Mr. Le Hoang Chau - Chairman of the Ho Chi Minh City Real Estate Association (HoREA), the real estate market is in dire need of commercial housing supply due to legal problems and the structure of housing products is out of phase. Many houses are in the high-end segment, but there is a shortage of affordable commercial housing, leading to continuous increases in housing prices in recent years. This makes it difficult for middle-income and low-income people in urban areas who have a real need to buy a house to live in.
Solutions to bring affordable apartments back to the market
To address the shortage of affordable housing supply, Ms. Giang Huynh - Director of Research and S22M at Savills - believes that a comprehensive solution is needed that combines the strengths of both the public and private sectors.
"In the context of limited state budget, funding for social housing projects will face many difficulties. At the same time, the private sector is also under inflationary pressure on input costs. Therefore, effective cooperation between the two sides becomes extremely necessary. In addition, increasing construction density and reasonable planning will play an important role in providing affordable housing solutions," she said.
According to Ms. Giang Huynh, the city government needs to introduce strong incentive policies to attract the cooperation of landowners, thereby forming new sustainable residential areas.
An apartment building in Hanoi (Photo: Ha Phong).
"By optimizing land area, combining with public facilities and green space, we can gradually solve the increasingly urgent housing problem. Close coordination between the government and investors will be the key to realizing these ideas," Savills experts emphasized.
Sharing the same view, Dr. Nguyen Van Dinh - Chairman of VARS - said that there needs to be strong intervention from the State.
Firstly, the State needs to research and develop policies to create favorable conditions for investors to develop affordable commercial apartments, such as applying policies to exempt or reduce land tax and corporate tax, or increase construction density or land use coefficient compared to standards for affordable commercial housing projects.
At the same time, there is a priority policy in approving planning and granting construction permits, helping to shorten project development time, thereby reducing investment costs. In addition, it is proposed to "add priority points" when selecting investors to implement investment projects using land for investors who have created affordable housing.
Second, it is necessary to promote cooperation projects between the Government and the private sector to build affordable housing. Specifically, the private sector will undertake most of the construction and development process, while the State provides land incentives and legal support.
Third, the State management agency needs to have policies to support people's demand for housing. The Government can study the establishment of a fund to support the development and maintenance of the supply of low-cost apartments. This fund can be supplemented from the State budget and from private investors.
The fund will publicly and transparently announce information on selling and renting prices, helping people easily access and compare, thereby choosing housing products that suit their needs and financial capabilities. At the same time, the fund is also the management agency, reviewing individuals who have purchased/rented projects developed by this fund and taking back houses if they are found to have bought/sold in violation of regulations, falsified income documents and failed to declare assets properly.
In addition, the State needs to have policies to limit the motivation for speculation, and should soon study and apply real estate taxes, targeting owners who do not put real estate into business activities, or do not carry out construction after receiving land... The State also needs to establish agencies or committees to monitor housing, and have strict sanctions against cases of speculation, price manipulation or illegal price increases.
However, in order for regulatory policies to be truly effective and ensure the market operates safely and healthily in the long term, the State needs to soon complete the information and data system on the real estate market and the identified housing management system.
The information system and data on the real estate market, especially price data, will be an important foundation for managing/monitoring real estate prices, ensuring that apartments are affordable for low- and middle-income earners, avoiding sudden increases in housing prices due to speculation or other market factors.
The integrated housing management system with national database on population as well as social welfare payment status, mortgage records, etc. will help agencies identify transaction history, housing status of each individual, distinguish speculators from home buyers with real housing needs.
Source: https://dantri.com.vn/bat-dong-san/can-ho-chung-cu-gia-25-trieu-dongm2-tuyet-chung-tai-ha-noi-va-tphcm-20241126020302836.htm
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