The market is losing apartments under 25 million VND/m2
Regarding the recent information on the real estate market, the Ministry of Construction said that the number of newly approved and completed housing development projects has decreased compared to previous years, leading to a rather limited supply for the market. However, housing prices tend to increase, exceeding the financial capacity of the majority of people who want to buy for use.
Notably, there are almost no projects in the affordable apartment segment (priced under 25 million VND/m2) on the market. The market is mainly the mid-range segment (priced at 25-50 million VND) that are eligible for capital mobilization and transactions.
A social housing project has been in use for many years in Hanoi (Photo: Ha Phong).
According to Savills's Hanoi real estate market overview report for the fourth quarter of 2023, the supply of new apartments is at its lowest in 10 years. Apartments priced above VND4 billion account for 42% of the number of units sold in 2023, up from 3% in 2019. Apartments priced between VND2-4 billion account for 55% of the market share. Only 3% of apartments are priced below VND2 billion.
According to the Vietnam Association of Realtors (VARS), over the past years, rapid economic growth and urbanization have increased demand for housing while supply has continuously decreased and has shown no signs of increasing since 2018, causing the imbalance between supply and demand to become increasingly serious.
The supply structure is increasingly tilted towards high-end, high-value products for investment and speculation purposes. This prolonged phase difference causes housing prices to continuously rise, establishing a new price level far beyond the affordability of the majority of people.
Not only does it make it increasingly difficult for those who need to buy a house to live in to access housing with their own income, but it also reduces this need. Especially the younger generation, gradually giving up because "no matter how hard they try, they can't buy a house", switching to a lifestyle of enjoyment, prioritizing renting.
Research data from this unit shows that the proportion of apartment supply in the affordable segment (under VND 25 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 2019-2022, the proportion of mid-range apartments (VND 25-50 million/m2) also decreased to 54%, 46%, 34%, 27% respectively, with the supply mainly coming from products priced at VND 40-50 million/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. And only about 25% of the demand for real housing has the financial capacity to transform into real demand.
Housing expenses should not exceed 30% of total income.
In the above context, along with social housing, affordable housing will be the main and strong development trend in the real estate market in the coming period. Because this is a segment originating from the actual needs and capabilities of the majority of people.
According to Mr. Nguyen Van Dinh - Chairman of VARS, there is no official concept of affordable housing. However, it is possible to point out some characteristics of this type by comparing it with social housing and based on the method of determining the reasonableness of housing prices.
An unfinished construction project in Ha Dong district, Hanoi (Photo: Ha Phong).
Social housing is mainly aimed at low-income earners and workers in industrial parks, exempted from land use fees and access to preferential credit packages specifically for investors and home buyers...
Affordable housing is commercial housing with moderate 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.
According to the chairman of VARS, affordable housing is when each household 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, so affordable housing has a price of about 2-2.5 billion VND/apartment," Mr. Dinh gave an example.
According to him, it is currently very difficult to develop apartment projects with prices in the above range, especially in two special cities with high housing demand. However, difficult does not mean impossible.
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