Building affordable housing to 'warm up' the real estate market?

Income of several tens of millions of dong is also difficult to buy a house

“My husband and I have been renting a house for 7 years now and don’t know when we will be able to buy a house in Ho Chi Minh City,” said Nguyen Thi Thuy, a resident of Tan Binh District.

Ms. Thuy said that she works as an accountant for a garment company with a salary of 10 million VND/month. Her husband works as a technician for a construction company with a salary of 12 million VND/month. The total income of 22 million VND is just enough for the couple to cover their living expenses and take care of their 6-year-old daughter's education.

According to Ms. Thuy, she and her husband have saved several hundred million VND, but this amount of money is not enough to buy a house. The minimum amount of money they need is about 600 million VND, so that the bank will lend them to buy the oldest and cheapest apartments in the city.

Ms. Thuy shared that even though she had 600 million VND, her monthly income did not increase, and she and her husband did not have money to pay the principal and interest to the bank. Therefore, the dream of owning a house was still very far away.

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Many people with average incomes cannot buy a house in Ho Chi Minh City. (Illustration: Dai Viet)

Like Ms. Thuy's family, Mr. Vo Thanh Tuan - a communications specialist for a foreign company - has not been able to buy a house even though his current income is 16 million VND/month.

According to Mr. Tuan, if he wants to buy a house at the present time, he will need to borrow about 1.5 billion VND. Thus, the principal and interest payments to the bank will "swallow up" his entire salary.

Social housing “gloomy”

While millions of low- and middle-income people are in need of housing, the social housing segment is still developing very slowly. The reason is that this type of housing faces many obstacles in legal procedures, inadequacies in regulations, difficulty in borrowing preferential loans and difficulty in identifying policy beneficiaries.

Dr. Doan Van Binh, a real estate expert, commented that although the Housing Law specifically stipulates conditions for purchasing social housing such as income, place of residence, housing, etc., it is still difficult to determine the right subjects to buy, rent or rent-purchase.

In addition, the regulation that commercial housing projects in urban areas of type III or higher must reserve 20% of their land for social housing is not suitable for reality. This causes many projects to reserve land for social housing but not use it, wasting land resources and causing urban aesthetic loss.

For small projects, if 20% of the area is used for social housing, this area is not enough to build a standard social housing area with utilities and landscape to serve the people.

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The social housing market is developing very sluggishly and gloomily. (Photo: D.V)

According to Dr. Binh, people and businesses that build social housing also face many difficulties in accessing preferential loans. Credit activities to support the social housing segment have not yet been effective.

According to Ms. Tran Lan Anh, representative of a real estate company in District 12, Ho Chi Minh City, the reason why businesses are not interested in social housing is because land prices have increased too high and the profit from building social housing is too low.

Meanwhile, mechanisms and policies have not provided much support to businesses. Therefore, businesses rarely participate in building social housing and only focus on building commercial housing.

Affordable housing development is the solution

According to real estate experts in Ho Chi Minh City, developing affordable housing will open up opportunities to solve the imbalance between supply and demand, meet the housing needs of the majority of people with average and near-average incomes, and reduce the housing price level of the entire market.

Over the years, the Party and Government have always paid attention to providing housing for the people and identified it as a key task in the country's socio-economic development. However, rapid economic growth and urbanization have increased the demand for housing. Meanwhile, supply has continuously decreased and has not shown any signs of increasing since 2018, making the imbalance between supply and demand increasingly serious.

The supply structure is increasingly “leaning” towards high-end, high-value products for investment and speculation purposes. This prolonged imbalance has caused housing prices to continuously rise, establishing a new price level far beyond the affordability of the majority of people. Therefore, developing affordable housing will open up opportunities to resolve the imbalance between supply and demand, meeting people's housing needs.

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Affordable housing is expected to help the real estate market "warm up" in the future. (Illustration photo: Dai Viet)

Research data from the Vietnam Association of Realtors (VARS) shows that the proportion of apartment supply in the affordable segment (under VND25 million/m2) out of the total housing supply has continuously decreased, from 30% in 2019 to 7% in 2022 and 6% in 2023.

In the period of 2019 - 2022, the proportion of mid-range apartments (25 - 50 million/m2) also decreased to 54%, 34%, 27% respectively with the supply mainly coming from products priced at 40 - 50 million VND/m2.

Meanwhile, the demand for real housing always leads the housing demand structure with a proportion of 80%, the remaining 15% is long-term investment demand and 5% is speculative demand. Also according to VARS data, only about 25% of the demand for real housing has the financial capacity to pay.

In that context, VARS believes that, along with social housing, affordable housing will be the main development trend in the real estate market in the coming period, because this is a segment originating from the needs and actual capabilities of the majority of people.

What is “affordable”?

Dr. Nguyen Van Dinh, Chairman of the Vietnam Real Estate Brokers Association, said that Vietnam does not have an official concept of affordable housing, but it is possible to point out some characteristics of this type by comparing it with social housing and based on how to determine the reasonableness of housing prices.

Accordingly, currently, social housing is mainly aimed at low-income earners and workers in industrial parks, exempted from land use fees and accessing preferential credit packages exclusively for investors and home buyers...

Affordable housing is commercial housing with affordable prices, suitable for the financial capacity of the majority of people, targeting people with average and near-average incomes, with a certain level of savings, in special urban areas.

Mr. Dinh believes that affordable housing is when families can balance housing costs and other living expenses within their income.

According to experience in assessing housing affordability in many countries around the world, affordable housing is housing where housing costs account for no more than 30% of the total household income. For a household with an income of about 30 million VND/month, 30% of this cost is equivalent to an accumulation of about 100 million VND/year, affordable housing has a price of about 2 - 2.5 billion VND/apartment.

However, according to Mr. Dinh, in reality, it is very difficult to develop apartment projects with prices ranging from 2 to 2.5 billion VND, especially in two large cities such as Ho Chi Minh City and Hanoi, but difficult does not mean impossible.

Mr. Dinh believes that if the whole market joins hands and housing policies follow the market economy direction, affordable housing will develop. Developing affordable housing in parallel with social housing

According to VARS, on the State side, it is necessary to provide an official definition of affordable housing; research mechanisms and preferential policies specifically for affordable housing with the main goal of encouraging investors to participate in developing the supply of this segment, meeting the housing needs of households with average or near-average incomes.

These include preferential credit policies specifically designed to increase "purchasing power" or increase taxes on second and third homes to reduce speculative incentives, and tax revenue can be recycled to support those in real need. Support investors in developing and operating social infrastructure projects...

In addition, increasing investment and expanding connecting transport infrastructure. When distance is no longer an issue, the trend of moving from the central area to the suburbs is inevitable.

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