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 price, the smallest unit in the project, measuring 32m2, will cost around VND 800 million. Meanwhile, the largest unit, spanning 77m2, will be priced at approximately VND 2 billion. This is the highest price ever for a new social housing project in Hanoi and a record in the history of social housing development in 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 common price range of VND 13-17 million/m2 in the previous period, social housing prices have significantly increased.

Regarding this issue, Mr. Nguyễn Anh Dũng, Head of the Department of Economics and Construction Materials (Hanoi Department of Construction), stated that announcing social housing prices is an important step to help people access information and make informed decisions about purchasing a home that fits their financial capabilities.

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

This retrospective review after nine months is also part of the state management process, ensuring fairness and transparency in implementing social housing projects. It also prevents speculation and price manipulation, thereby mitigating negative impacts on the real estate market.

Seeking Solutions to Reduce Input Costs

Explaining the rising prices of new social housing, Mr. Chử Văn Hải, Head of the Department of Social Housing Development and Management, Housing and Real Estate Market Management Bureau (Ministry of Construction), stated that the prices of social housing areas would vary depending on the design requirements set by the investor and the project scale.

In the past, social housing in Hanoi was priced below VND 20 million/m2. The current higher prices result from increased labor and construction material costs.

Additionally, social housing is a segment supported by government policies aimed at reducing construction costs. However, this type of housing must still adhere to the same quality and standards as commercial apartments. The difference between the two segments lies in area size, design, and other factors.

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

In the context of a dwindling supply of “clean” land, acquiring a suitable plot for a project accounts for a substantial portion of the total investment. Moreover, material prices, labor costs, and financial expenses (loan interest) are reflected in the selling price.

“Furthermore, in terms of supply, the number 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 is vast and continues to grow. This supply-demand imbalance is another factor driving up prices,” added Mr. Nguyễn Quốc Anh.

In reality, the high prices of social housing make homeownership a distant dream for low-income earners. With prices ranging from VND 25-27 million/m2, a 50m2 apartment would cost VND 1.25-1.35 billion. As a result, social housing is becoming “affordable commercial housing” rather than serving its intended target group.

According to real estate experts, the increase in social housing prices also creates pressure on society and the market. When low-income earners cannot afford social housing, they are forced to look for alternatives in other segments, contributing to rising prices in the affordable commercial housing market and the rental market.

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

Additionally, it is necessary to streamline and simplify procedures, eliminating unnecessary barriers, to expedite the implementation of social housing projects and reduce opportunity costs for investing enterprises.

Furthermore, there should be a focus on developing professionally managed social housing rental models. Social housing projects should be constructed in satellite cities instead of the inner city, where land prices and site clearance costs are exorbitantly high.