The Capital’s Social Housing: When ‘Affordable’ Costs a Premium

Taking the example of the Ecohome 3 social housing project in Dong Ngac, Hanoi, units are now being advertised for sale at a price range of 55-65 million VND per square meter, equivalent to approximately 3 to nearly 4 billion VND each. This price range is on par with, if not higher than, many commercial projects in the same area.

Meanwhile, the initial selling price announced for this project was around 16.3 million VND per square meter, a price that is accessible to workers, equivalent to about 650 million to over 1.1 billion VND per unit.

Similarly, the Hope Residences social housing area in the old Long Bien district is currently being advertised at a price range of 50-60 million VND per square meter. Accordingly, a 70-square-meter, two-bedroom apartment is being offered for sale at 4.05 billion VND, equivalent to 57.86 million VND per square meter. The selling price when it was launched in 2018 was 16 million VND per square meter.

Another example is the Kien Hung social housing area in the former Ha Dong district. At the time of handover in 2020, the price was about 13.7 million VND per square meter, but it has now surged to a range of 43-50 million VND per square meter.

Likewise, in 2018, the CT2A apartment building of the Thach Ban Housing Project in the old Long Bien district officially received applications for purchase, with the price announced by the investor at 12.3 million VND per square meter. Currently, the price of apartments here has increased to around 50 million VND per square meter.

Even social housing projects that were handed over a decade ago still have sky-high selling prices. The Dong Mo social housing area in the old Hoang Mai district, which was launched in 2016 with a price of over 14 million VND per square meter, is now offered at a price range of 55-60 million VND per square meter, equivalent to that of old commercial apartments within a 1-kilometer radius.

Also located in the old Hoang Mai district, the Rice City Linh Dam social housing area had a selling price of 15 million VND per square meter when it was launched in 2014. After more than a decade, the selling price has climbed to a range of 60-70 million VND per square meter.

At the Ngo Thi Nhậm apartment building in Ha Dong, one of the first social housing projects in Hanoi, the selling price in 2010 was only 8 million VND per square meter. However, the price has now soared to a range of 55-60 million VND per square meter.

Ms. Nguyen Minh Anh, a worker at the Bac Thang Long Industrial Park in Hanoi, had rented an apartment at the Ecohome 3 social housing project for five years and eagerly prepared to buy it after the rental period as per regulations. However, when she found out that the price had tripled, she had to give up on her plan.

“I thought social housing would be affordable, but when I asked the landlord about buying it, I was surprised to hear that they were asking for exactly 60 million VND per square meter, which is comparable to the price of many current commercial apartments,” expressed Minh Anh. With a combined income of about 15 million VND per month, even with a bank loan, it would be challenging for her and her husband to afford it, let alone cover living expenses and raise their children.

While genuine homebuyers struggle to afford these properties due to the high prices, many investors have been “hoarding” units since the initial launch, waiting for the eligibility period for resale to pass so they can sell them at commercial prices, equivalent to about 60-70 million VND per square meter. Even secondary speculators are willing to invest, hoping to profit from real estate as commercial apartment prices are currently quite high.

Ms. Tran Ngoc Lan, a real estate broker in Hanoi, stated that housing prices in the city are currently very high. In the past, prices have continuously increased along with the general market trend. Even social housing projects that have been in use for decades and have deteriorated are still being advertised at prices of up to 60 million VND per square meter.

“Hanoi’s housing prices are no longer suitable for the budgets of the majority of the population, and housing transactions have slowed down recently,” said Ms. Lan. She also advised that since the prices of used social housing are now comparable to commercial housing, it would be better for eligible buyers to wait and submit applications for the lottery draw to purchase social housing units.

Price Increase Due to Supply Scarcity

Explaining the reason for the high prices of social housing, Mr. Nguyen Van Dinh, Chairman of the Vietnam Real Estate Brokers Association (VARS), stated that the first reason is the long-standing imbalance between supply and demand: an oversupply of luxury housing and a shortage of affordable housing. While the demand for affordable housing is high, the supply is very limited, leading to a scarcity of options. In the second quarter, 60% of the new supply belonged to the luxury segment, priced above 50 million VND per square meter, and was concentrated in a major urban area in Hanoi. In contrast, the affordable segment accounted for only 7% of the total supply.

Another reason is that the price of apartments has established a new benchmark. New apartments priced below 50 million VND per square meter have become scarce. In the first half of this year, new projects were offered in the price range of 60-80 million VND per square meter. Meanwhile, the demand for housing remains substantial. According to estimates, Hanoi will require about 185,200 homes by 2025, with nearly 90% being apartments. Mr. Dinh pointed out that from now until 2025, Hanoi is expected to face a shortage of about 50,000 apartments every year.

“High demand coupled with weak supply pushes prices up, and social housing prices are not immune to market forces, continuously rising despite various factors,” said Mr. Dinh.

Additionally, according to Mr. Dinh, the new legal framework in Vietnam could further drive up land prices. A significant increase in land prices will inevitably impact apartment prices, whether for old or new units. Land prices have already risen compared to five years ago, and construction costs have also increased, inevitably leading to higher apartment prices.

Sharing the same viewpoint, Mr. Nguyen Quoc Anh, Deputy General Director of PropertyGuru Vietnam, identified two main reasons for the sharp increase in apartment prices in Hanoi, including social housing.

Firstly, the supply of apartments in Hanoi is limited. Despite efforts to resolve legal issues for developers, recent projects have only contributed about 20,000-30,000 apartments annually, while the typical demand is for 70,000-80,000 apartments per year.

Secondly, the demand for purchasing apartments in Hanoi remains robust. Notably, this demand is not only from Hanoi and the northern provinces but also from the southern region.

Mr. Nguyen Anh Que, a real estate expert, attributed the price surge during the 2020-2024 period to the limited supply of apartments due to investment procedure difficulties. However, he emphasized that everything has its cycles and that the market is governed by supply and demand dynamics. As a result, when prices rise too high, the market will self-correct.

According to Mr. Que, the market has shown signs of a downturn since the end of last year. Prices have started to decline, and transaction volumes have decreased. The belief that apartment prices will continue to rise has almost vanished.

He noted that investment procedures have improved, and the supply of apartments, including social housing, has increased. With new supply of over 10,000 units in areas such as Dong Anh, Me Linh, Thanh Tri, and Nam Tu Liem districts, as well as other areas, buyers will have more options. This increased supply of social housing may help alleviate the upward pressure on prices.

To address the issue of high social housing prices, Mr. Le Hoang Chau, Chairman of HoREA, suggested allowing social housing projects to adjust the land use coefficient or building density to a maximum of 1.5 times to optimize land use and create more units.

This proposal not only improves land use efficiency but also facilitates developers in executing social housing projects. Additionally, the compensation and site clearance costs will be distributed among a larger number of units, thereby reducing the cost per unit and making social housing more affordable.