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| Research data from the Vietnam Association of Realtors shows that the affordable apartment segment (priced under VND25 million/m2) - affordable housing - has become "extinct". (Photo: Linh An) |
Affordable housing needs are being “abandoned”
The Vietnamese real estate market has gradually “heated up” thanks to the driving force of new supply and support policies from the Government. However, the increase in supply – mainly contributed by the high-end segment – has only met a very small part of the housing needs of the people, while the needs of the majority of people – affordable housing, are being “abandoned”, making the imbalance between supply and demand increasingly serious.
Research data from the Vietnam Association of Realtors (VARS) shows that the affordable apartment segment (priced below 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, VARS statistics show that in the period of 2018-2023, not only is the quantity continuously decreasing, the structure of apartment supply in the two special urban areas is also increasingly unbalanced. The supply structure is increasingly "leaning" towards the high-end and luxury segment.
In Hanoi, before reaching the milestone, 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 launched for sale.
In Ho Chi Minh City, since 2018, the proportion of affordable apartments has decreased sharply at a double-digit rate, from 20% in 2018 to 0.5% in 2020 before completely disappearing in 2021.
Until the first 9 months of 2024, the supply of apartments in Hanoi witnessed a significant recovery, but the imbalance between supply and demand became even more serious when about 80% of the supply of apartments opened for sale in Hanoi and Ho Chi Minh City in the first 9 months of 2024 had a selling price of VND50 million/m2 or more.
Despite the high price, newly launched projects or new launches have achieved very good sales rates because the demand for apartments, both for living and investment, has always remained high and on an upward trend. Some apartment projects recorded absorption rates of up to 99% right at the time of official launch.
This situation causes apartment prices to continuously increase and establish a new level, at a high level in both the primary and secondary markets, far beyond the affordability and income growth rate of the majority of people.
Research on the apartment price index, reflecting the average selling price fluctuations of projects in the sample set of 150 projects selected and observed by VARS, also shows that, as of the third quarter of 2024, the average selling price of the sample project cluster in Hanoi is close to 60 million VND/m2, an increase of 64.0% compared to the second quarter of 2019.
The average selling price of the project cluster in Ho Chi Minh City increased from VND49.2 million/m2 to VND64.2 million/m2, reflecting an increase of 30.6% compared to the base period.
In Da Nang, the Da Nang market price index showed an increase of 46.2% in the third quarter, higher than that of Ho Chi Minh City, with more than 50% of new supply in the third quarter priced above VND80 million/m2.
Thus, it can be said that in large cities, although the demand for affordable housing is very large and not met. But the supply of luxury apartments is not redundant and only meets a certain part of the demand.
What is the cause?
VARS believes that it is unlikely that affordable housing will "appear" in the central areas of Hanoi and Ho Chi Minh City, because the number of housing projects approved for investment in recent years can only be "counted on the fingers". In 2023 and early 2024, there will be almost no new projects in the affordable housing segment being implemented, and real estate projects being implemented mainly focus on the high-end segment.
Explaining the reason, VARS said:
Firstly , the main reason why affordable housing does not receive much attention from real estate developers is because the profit margin from this segment is lower than that of high-end segments.
To build affordable housing, developers must optimize costs from land fund, construction to operation. Meanwhile, calculations by project developers show that with a profit margin of only about 15%, if capital is stagnant for 1-2 years or sales are delayed for 1-2 years, developers will lose money.
Moreover, central land is increasingly scarce, currently and in the future it is mainly located in large urban areas with a series of infrastructure and public utilities that need investment, plus input costs, especially land costs, are increasing, prices cannot be affordable.
Second , although the Government has been introducing many policies to encourage the development of social housing and affordable housing, legal procedures related to land and planning are still major barriers. The complicated licensing process, long time, along with the increasingly scarce land fund for housing development in big cities, make project developers have to consider carefully before investing in this segment.
In addition, credit support policies for home buyers in this segment have not been implemented synchronously. Financial support packages for low- and middle-income earners, such as preferential interest rates and loan sources, still face many difficulties in accessing and complicated procedures.
Third , high-end projects bring high profit margins and are not difficult to sell. Because the demand for high-end housing, including both residential and investment needs, is very large, from the group of high-income customers is constantly increasing along with economic development and foreigners from the wave of foreign investment as well as overseas Vietnamese on the basis of the new legal corridor "relaxing" ownership conditions for this group.
In fact, there are many customers willing to pay a premium to own the most limited and high-end products in the project. This makes the affordable housing segment even less attractive to project developers.
Handing over more than 12.5 hectares of land for the Urban Housing Project in Duy Tien
The People's Committee of Ha Nam province has just issued a decision to allocate 125,012.07m2 of land to Trung Dong Construction Investment Joint Stock Company (Trung Dong Company) to implement the project of building an urban housing area in Duy Tien town. Of which, 11,979.28m2 of land is for social housing construction.
According to the Decision, the People's Committee of Ha Nam province assigned Trung Dong Company 125,012.07m2 of land in Hoang Dong and Tien Noi wards, Duy Tien town, to implement the project of building an urban housing area. Of which, 82,882.5m2 of land will be used to build technical and social infrastructure works, including: Social housing (11,979.28m2), cultural houses, schools, green land, water surface and traffic works... according to the approved detailed planning.
After construction investment, infrastructure works not used by investors will be handed over to local authorities and specialized agencies for management according to regulations.
In addition, the People's Committee of Ha Nam province also assigned 42,129.57 square meters of residential land to Trung Dong Company with a land use term of 50 years. The transferee of residential land use rights and the buyer of houses attached to residential land use rights are entitled to use the land stably and permanently.
In addition, the Provincial People's Committee also leased 10,409.48 square meters of land in Tien Noi ward to Trung Dong Company for the purpose of commercial and service activities, in accordance with the law, for a period of 50 years.
The People's Committee of Ha Nam province said that the method of land allocation and land lease is without auctioning land use rights, without bidding to select investors to implement projects using land. The People's Committee of Ha Nam province requested the People's Committee of Duy Tien town to coordinate with the authorities of Hoang Dong and Tien Noi wards, the Department of Natural Resources and Environment to determine the boundary and hand over the land to Trung Dong Company, and at the same time speed up the progress of land recovery and site clearance for the remaining land area within the project boundary.
The provincial People's Committee also requested Trung Dong Company to focus resources to quickly implement the project. After completing the project works, the company will have to hand over the infrastructure works and unused land to the local government.
The relevant departments and agencies will continue to coordinate and support the company in carrying out investment procedures, paying land use fees and implementing the project in accordance with the law.
The Urban Housing Project in Duy Tien town is one of the important projects to develop urban infrastructure, meet the housing needs of people and contribute to promoting the socio-economic development of the locality.
Hanoi: Abolish 2 decisions related to land use rights auction
The Hanoi People's Committee has just issued Decision No. 67/2024/QD-UBND abolishing two decisions on regulations on the authority to approve the starting price for auctioning land use rights to allocate land with land use fees or lease land in Hanoi. The decision takes effect from December 1, 2024.
Specifically, the Hanoi People's Committee abolished the entire Decision No. 19/2019/QD-UBND dated October 15, 2019 of the City People's Committee regulating the authority to approve the starting price for auctioning land use rights to allocate land with land use fees or lease land in Hanoi.
At the same time, the city also abolished Decision No. 07/2023/QD-UBND dated April 21, 2023 of the City People's Committee on amending Article 1 of Decision No. 19/2019/QD-UBND dated October 15, 2019 on regulations on the authority to approve the starting price for auction of land use rights to allocate land with land use fees or lease land in Hanoi city.
Accordingly, in Decision No. 07/2023/QD-UBND, the Hanoi People's Committee will approve the starting price for the auction of land use rights to allocate land with land use fees or lease land with a one-time payment for the entire lease term, applied to land plots or land areas with a value of 30 billion VND or more.
The decision takes effect from December 1, 2024.
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