Growth in apartment prices has continued for 19 consecutive quarters
Savills Vietnam’s report shows that in just the past 4 years, apartment prices have increased by 77%. Specifically, in the fourth quarter of 2023, the average primary price of an apartment was 54 million VND/m2, increasing for 19 consecutive quarters and up more than 77% compared to the first quarter of 2019.
According to the Ministry of Construction, in 2023, apartment prices are expected to continue to increase in the two major cities of Hanoi and Ho Chi Minh City, especially in central areas. In Ho Chi Minh City, apartment prices have mainly increased in the mid-range and high-end segments, especially in projects in close proximity to the city center such as Binh Thanh district and Thu Duc district with a primary selling price of over 60 million VND/m2.
One of the reasons for the rapid increase in house and apartment prices in recent times is the market imbalance between luxury and high-end products and affordable housing. This imbalance has led to speculation, hoarding, and pushing up real estate prices.
Image: Ha Vy
In response to the unreasonable situation in the product structure, since the beginning of 2024, the Prime Minister has instructed the Ministry of Construction to guide businesses in restructuring segments and lowering product prices, and to provide appropriate, timely, and effective solutions for restructuring segments for those in need of affordable housing, social housing, and low-income people.
However, reducing house prices is not an easy task. There are too many cost factors burdening businesses, including construction costs, raw materials, labor costs, financial costs, and management costs, all of which are increasing.
Affordable housing offers hope for the real estate market
At the end of 2023 and the beginning of 2024, many developers have been adapting to the market by launching a series of affordable housing projects, especially in neighboring areas of Ho Chi Minh City such as Binh Duong, Long An, and Dong Nai.
Experts in the industry expect that the Land Law, Housing Law, and Real Estate Business Law just passed will help eliminate legal bottlenecks, streamline land procedures, create fair and transparent access to land, and increase land funds for the development of affordable housing, bringing this segment back to the market.
Mr. Hoang Hai, Director of the Housing and Real Estate Market Management Department (Ministry of Construction), affirmed that these three laws create an important legal framework with many provisions that have a positive impact on the market, investors, and customers, supporting the development strategy of social housing and affordable housing in Vietnam.
According to Mr. Le Hoang Chau, clear legal corridors, unlocking barriers, and further reducing interest rates will encourage the development of affordable and social housing projects. Another expectation is that when policies supporting the affordable housing segment penetrate more deeply, the supply will also be more abundant.
Similarly, Mr. Nguyen Van Dinh, Chairman of the Vietnam Real Estate Brokerage Association, believes that the development of affordable housing will open up opportunities to solve the imbalance between supply and demand, reducing the overall housing prices in the market. If the whole market joins hands and policies regarding housing adopt the market-oriented economic approach, then affordable housing will develop in parallel with social housing.
However, in Vietnam, there is no official concept of affordable housing. To implement this, Mr. Dinh believes that it is necessary to provide an official definition of affordable housing and to have preferential credit policies specifically designed to increase purchasing power and support developers in infrastructure development and operation of social infrastructure projects. In addition, it is necessary to increase investment and expand transportation infrastructure connections. When distance is no longer an issue, the trend of shifting from the city center to the outskirts is inevitable.
Similarly, Dr. Can Van Luc, a Finance and Banking expert, believes that the state needs to have a more balanced and harmonious approach to the financial market to create a development-oriented financial system while still controlling risks; emphasize regulation of supply and demand and real estate prices. At the same time, accelerate public investment disbursement, implement economic and social recovery programs; regulate real estate segments to have appropriate credit and financial policies. Businesses also need to have debt payment plans, diversify access to capital, reduce financial leverage, avoid scattered investment, actively contribute opinions and criticism on related policies and laws.
For the proposed solutions in 2024, most experts believe that the state needs to create a coordinated and unified institutional framework to promote sustainable development of the market, continue fiscal policies related to capital, taxes, fees, and public investment; continue to simplify administrative procedures. Localities need to expedite the establishment and approval of plans as a basis for implementing real estate projects, pay attention to allocating independent social housing projects in suitable locations. At the same time, publish the list of real estate projects that must choose investors through bidding to provide businesses with full information, actively research, and publicly register investment participation. Real estate businesses themselves need to restructure segments and product prices; continue to improve project quality.
