Many people choose to rent long-term because Ho Chi Minh City lacks affordable apartments.

Shortage of supply makes it difficult to own a home

The age of 25-35 is considered the “golden decade” because this is the period of stable employment, gradually increasing income and starting a family. Therefore, many experts believe that this is also the golden period for people in this age group to own a house. However, economic issues as well as the housing market are currently facing many challenges, making the dream of owning a house for this group become more distant.

The first reason is that the cost of living in a large urban area like Ho Chi Minh City is increasing day by day, always in the top of the localities with the most expensive living costs. Specifically, according to this data recorded in the spatial cost of living index (SCOLI) report of the General Statistics Office, in 2015, the SCOLI index of Ho Chi Minh City reached 97.39%, ranked 6th, this is also the year Ho Chi Minh City ranked lowest. But by 2021, Ho Chi Minh City held the 3rd position with the SCOLI index reaching 98.98% and maintained this position in 2022 with the SCOLI index reaching 96.2%.

Meanwhile, Ho Chi Minh City is the destination of a large number of people in the group of skilled workers, in their prime working age from many provinces and cities across the country. Data from Savills Vietnam shows that with a population of more than 10 million people, 55% of whom are young, about 30% of whom have the need to buy a house.

Many people choose to rent long-term houses in the center of Ho Chi Minh City, rare apartments in Binh Dan, picture 1 — Ho Chi Minh City is seriously lacking affordable apartments.

However, with the target being small apartments of under 50m2 with prices from 2-3 billion VND, this is a segment with extremely scarce supply, accounting for less than 20% of the current market share, or even lower.

Savills market research data shows that, for the affordable housing segment (class C) in Ho Chi Minh City, sales are still taking place but are uneven, leaving many people with real housing needs but low incomes without many options. Meanwhile, the issue of legal settlement and procedural obstacles for projects is still slow, further reducing the number of products on the market.

According to data from Cushman & Wakefield, as of June, the average selling price of a mid-range apartment (class B) in Ho Chi Minh City, with an area of 70 square meters and 2 bedrooms and 2 bathrooms, was about 4-4.5 billion VND. This mid-range price is 16-17 times higher than the average household income in this urban area.

Therefore, factors such as increasing living costs, high demand for affordable housing, and scarce supply of affordable apartments have created barriers, making it difficult for many people, even in the "golden decade", to own a home.

Without financial support from family, the minimum income required to buy a house is from 30-45 million VND per month. This is the income threshold needed to accumulate a down payment and pay additional bank interest. However, due to the above factors, the accumulation of people aged 25-35 still cannot keep up with the price increase of the real estate market in recent times. When most of the apartment projects developed are in the middle and high-end segment. If you want to own a house, you can only choose projects in areas on the outskirts, even in neighboring provinces of Ho Chi Minh City.

Long term rental options in central area

Because they do not want to buy a house too far from the city center, but are worried about the financial burden of accessing mid-range apartments, many people are choosing to rent serviced apartments or boarding houses to live in. Some people even have the opinion that they will choose to rent long-term instead of saving up to buy a house in the future.

According to Nguyen Ha Khanh (29 years old), a bank employee in District 3, although she has been working in Ho Chi Minh City for 4 years, she has no intention of saving up to buy a house. With a family income of up to 60 million VND, saving up to buy an apartment in the suburbs is not a difficult problem for Khanh. However, after researching house prices in Ho Chi Minh City, buying a house is not an option for her and her husband for many reasons.

“In fact, choosing to rent a house instead of buying one is nothing new. This is also the choice of many colleagues working in the same company. Renting a house in the city center also has many advantages such as saving commuting time, being able to enjoy the amenities in the city center, and reducing the risk of having to travel long distances if buying a house. The money that should have been saved to buy a house, we will divide and invest through stock markets, gold and savings,” Khanh shared.

Many people choose to rent long-term houses in the center of Ho Chi Minh City, rare apartments in Binh Dan, picture 2 — Along with apartments, serviced apartments are the choice of many people who want to rent long-term in Ho Chi Minh City.

In addition, many people in the “golden decade” despite having a fairly high income do not buy a house but rent in the central area. In addition to the above reasons, the personalized lifestyle makes many people not want to be entangled in debt or pressure to buy a house. Instead, they can enjoy higher living needs with their current income instead of trying to buy a house at all costs.

In developed countries, this lifestyle is not strange when most people rent. They only buy a house when they have a high enough income, including a lot of passive income and reach financial freedom. Many opinions say that not only in Ho Chi Minh City but also in many big cities in Vietnam will not be out of that trend. Most young people will choose to rent apartments, until the utilities and traffic in the suburban areas are synchronized.

Therefore, to solve this housing problem, the immediate problem that needs to be overcome is the market supply. In addition to the self-change of real estate companies to meet the real housing needs of the market, there is still a need for intervention from management agencies to help increase the supply of affordable housing. Difficulties in project locations in the suburbs will be solved by convenient transportation. Meanwhile, the excessively high housing prices will be adjusted by moderate areas.

According to experts from Cushman & Wakefield, the affordable apartment segment with low prices of about 2-3 billion VND in Ho Chi Minh City is a housing solution for young people living and working in urban areas. Therefore, it is necessary to promote policies to support businesses to target this segment more.

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