Why Do Social Housing Prices Tend to Rise?

Social Housing Prices Reach New Heights

The Rice City Long Châu social housing project in Long Biên District has captured the attention of many as the joint venture of investors, Him Lam Thủ Đô JSC and BIC Vietnam, announced its selling price. The project will offer 1,699 social housing units for sale, 245 units for rent-to-own, and 36 units for on-site resettlement. The average tentative price is set at VND 26-27 million/m2.

At this rate, the smallest unit of 32m2 will cost around VND 800 million, while the largest unit of 77m2 will be priced at approximately VND 2 billion. This is the highest price ever for a new social housing project in Hanoi and across Vietnam.

Previously, the NO1 Hạ Đình social housing project in Tân Triều, Thanh Trì District, had a tentative selling price of approximately VND 25 million/m2. Another project in Mê Linh District with 700 units is expected to be priced at VND 21.2 million/m2. Compared to the previous range of VND 13-17 million/m2, social housing prices have significantly increased.

Regarding this matter, Mr. Nguyễn Anh Dũng, Head of the Department of Economics and Construction Materials (Hanoi Department of Construction), stated that announcing social housing prices is a crucial step in providing transparency and helping people make informed decisions based on their financial capabilities.

After nine months from the project’s completion, the Hanoi Department of Construction will conduct a retrospective review to ensure compliance with selling prices, area standards, and other criteria related to social housing. Any violations or discrepancies will be promptly addressed.

This retrospective review is part of the government’s management process, ensuring fairness and transparency in implementing social housing projects. It also aims to prevent speculation and price gouging, which could negatively impact the real estate market.

Seeking Solutions to Reduce Input Costs

Mr. Chử Văn Hải, Head of the Department of Social Housing Development and Management, Housing and Real Estate Market Management Bureau (Ministry of Construction), explained that the prices of social housing projects vary depending on the design requirements and scale set by the investors.

Previously, social housing prices in Hanoi were below VND 20 million/m2. The current increase can be attributed to rising labor and construction material costs.

Social housing is a segment supported by government policies aimed at reducing costs. However, this type of housing must still meet the same quality and standard criteria as commercial apartments. The difference lies only in area and design.

Mr. Nguyễn Quốc Anh, Deputy General Director of Batdongsan.com.vn, also attributed the high prices to the significant costs of compensation and site clearance in Hanoi, despite social housing projects being exempt from land use fees.

With the scarcity of “clean” land, acquiring suitable land for development already accounts for a substantial portion of the total investment. Additionally, material and labor costs, as well as financial expenses (loan interest), contribute to the final selling price.

“Moreover, the supply of approved and implemented social housing projects in Hanoi over the years has been extremely limited. Meanwhile, the demand from low-income earners, civil servants, and other eligible groups continues to grow, creating a supply-demand imbalance that further drives up prices,” added Mr. Nguyễn Quốc Anh.

In reality, the high prices of social housing, ranging from VND 25-27 million/m2, make homeownership a distant dream for low-income earners. With a 50m2 unit costing VND 1.25-1.35 billion, social housing is becoming more like “affordable commercial housing” rather than serving its intended purpose.

According to real estate experts, rising social housing prices also create social and market pressures. When low-income earners cannot afford social housing, they are forced to look into other segments, creating a ripple effect that increases the prices of affordable commercial housing and the rental market.

To address this issue, Mr. Nguyễn Quốc Anh suggested providing preferential credit packages for investors in social housing development and controlling input costs to ease the burden on selling prices.

Additionally, streamlining and simplifying procedures, removing unnecessary barriers, and expediting the implementation of social housing projects can reduce opportunity costs for investing enterprises.

Developing social housing for rent at affordable prices and with professional management is another proposed solution. Constructing social housing in satellite cities instead of the inner city, where land and site clearance costs are exorbitantly high, can also help alleviate the problem.