Housing Headaches in Asia’s Major Cities
Markets across Asia, including Vietnam, have varying approaches to housing solutions and development policies. However, the region faces common and unique challenges.
According to Savills Impacts’ research on the context of affordable housing, China is the only country in the region that has developed a large number of housing units in the past decade, despite a slowdown in population growth. However, urbanization continues, with a particular trend of labor migration from provincial areas to Tier 1 cities like Shanghai and Beijing.
Commenting on this trend, James Macdonald, Head of Research at Savills China, stated that housing affordability is not an issue in all Chinese cities.
He pointed out that another factor contributing to the lack of affordability is investment appetite. In China, real estate is a favored investment channel, while the broader economy offers few alternative investment options. The cost of owning property is relatively low, so many investors are willing to buy even if the units remain vacant. The Chinese government is working to address these issues, for example, by encouraging the development of rental housing.
Similar to China, housing affordability is only an issue in certain areas of Japan. Savills’ research indicates that while the overall population is declining, large and dynamic cities like Tokyo and Osaka are experiencing population growth.
Specifically, Tokyo saw a net migration increase of over 125,000 last year. Although Japan continues to see new housing supply, rising rents and costs in Tokyo, coupled with limited supply, could accelerate the trend of unaffordability. Moreover, the picture is complicated by the constant demolition and rebuilding of Japan’s existing housing stock, resulting in insufficient new supply to offset the overall supply.
Singapore has one of the most distinct housing markets in the world, with a clear division between public and private housing. Over three-quarters of the population live in public housing built by the Housing and Development Board (HDB). This has enabled 90% of citizens to own their homes.
Meanwhile, the private housing or “condominium” market is also tightly regulated to protect citizens’ interests. Foreigners purchasing property must pay a 60% stamp duty. However, population growth since the pandemic has driven up rents and sale prices in the condominium market.
Vietnam’s Efforts
In Vietnam, government spending on infrastructure accounts for 6% of GDP, an ambitious figure. Disbursements are made across various types of infrastructure projects, including roads, bridges, airports, seaports, and railways.
Troy Griffiths, Deputy CEO of Savills Vietnam, stated that the amended Land Law will expedite infrastructure development by implementing market-based pricing frameworks.
Notably, many of these infrastructure projects are improving connectivity through roads, highways, bridges, and ring roads. This connects suburban areas to city centers, providing more efficient infrastructure and utilities for residents.
Analyzing the impact of these dynamics on affordable housing, Do Thi Thu Giang, Director of Savills Vietnam’s Consulting Services, said that infrastructure development brings suburban areas “closer” to city centers, reducing travel time.
“This is most evident with transit-oriented development models like the Metro system, which enables large-scale development and high population density along the route, making commuting from suburban areas more efficient. Developing into the suburbs gives investors access to lower-cost land, allowing for more affordable housing development due to reduced land costs,” said Giang.
Do Thi Thu Giang, Director of Consulting Services at Savills Vietnam.
The prices in neighboring provinces are significantly lower and more affordable than in central cities. Binh Duong and Bac Ninh are prime examples, with average prices of around $1,500 per square meter of housing (apartments), which is considered affordable.
According to observations, some affordable apartment projects in Binh Duong, such as Phu Dong Sky Garden, Phu Dong SkyOne by Phu Dong Group, and Honas Residence by Hoang Nam, have received positive attention. Among these, the soon-to-be-handed-over Phu Dong Sky Garden project in An Binh, Di An, Binh Duong, with prices starting from VND 36 million per square meter, is sought after by young people, young families in Ho Chi Minh City, and nearby areas for its attractive location near Pham Van Dong Street, quality construction, and affordable price.
According to Giang, the journey to homeownership and capital accumulation often starts with affordable small apartments, and as families build their assets, they move on to larger units. The demand trend typically progresses from studio apartments to villas and then scales back in later years.
“Buying property in prime locations is often out of reach for first-time homebuyers. However, providing infrastructure that reduces travel time and offers more choices in neighboring areas addresses the issue of affordability. Infrastructure remains the most critical lever in reshaping the value proposition of the housing market,” added Giang.
Savills Vietnam’s Research team noted that apartments priced below VND 3 billion are considered affordable in Ho Chi Minh City. However, this supply is becoming increasingly limited, accounting for only 18% of the primary supply in the first half of 2024 and mainly located over 10 km from the city center. Affordability will be a significant challenge, as less than 5% of future supply in the next three years is expected to fall into this segment.
As a general solution, Savills Impacts’ research also emphasizes that there is no single solution to boosting housing supply and improving affordability. It is clear that neither the private nor the public sector can tackle this issue alone. By collaborating to address this challenge, the private sector can contribute capital and expertise, while the public sector can provide access to land and a transparent business environment for investors.
Empower Hierarchical Authorization, Corporates to be Autonomous and Accountable
The Ministry of Planning and Investment is finalizing the consultation process for the draft Decree on amending and supplementing certain provisions of Government Decree No. 10/2019/ND-CP on the exercise of rights and responsibilities of state capital representatives, and will soon submit it to the Government for approval. The proposed amendments align closely with the Prime Minister’s directive to enhance decentralization and delegation of powers, empowering State-owned enterprises and holding them accountable.
Strive to fully utilize the government budget in 2024
In terms of allocation, the disbursement of government investment capital requires an acceleration in implementation progress, aiming to fully disburse the state budget capital by 2024.
Government mandates construction projects during Tet holidays for critical projects
The government mandates that departments, agencies, and organizations encourage and motivate contractors to work relentlessly during the Lunar New Year period, with “3 shifts, 4 teams”, in order to strive for and surpass the schedule of key projects and works.
Southern industrial hub poised for growth with upcoming multi-billion-dollar highway projects
In 2024, the wealthiest and most populous province in the country will be gearing up to undertake an array of transportation projects worth approximately 45,000 billion Vietnamese Dong.
