Affordable housing in Vietnam is close to extinction
April 19, 2021
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Not a single project with abbordable appartments were appeared on the market in 2020.
According to the real estate consulting company DKRA Vietnam, in 2017, B and C class apartments accounted for 78% of the offer in Ho Chi Minh City. But in 2020, 69% of the offer was Class A apartments, and there were no new projects in the affordable C segment at all. A similar situation persisted in the first quarter of 2021, according to local news outlet VN Express.
According to the consulting company Jones Lang LaSalle, apartments worth less than $1,500 per sq.m are classified as Class C, within $1,500-2,500 - class B, above $2,500 - class A.
The average cost of Class C apartments has doubled from about $690 per sq.m in 2013 to $1,390 in 2020, according to DKRA. In 2021, the price tag has already increased by 5-10%. It is not surprising that due to the boom in the market there re about 300,000 real estate agents in Vietnam.
According to the Ho Chi Minh City Real Estate Association (HoREA), 70% of the apartment supply in 2020 was in the luxury segment and only 163 units were in the affordable sector, equivalent to 1% of the total number of new buildings.
In Ho Chi Minh City, it became impossible to find apartments at a price below $1,520 per sq.m. Even in neighboring provinces such as Binh Duong and Dong Nai, prices have soared to $1,430-1,950 per sq.m.
HoREA Chairman Le Hoang Chau said the project of apartments, originally offered at $1,300-1,430 per sq.m, is now being sold at $2,170-2,400, significantly reducing the number of buyers who look for a property to live in.
In Hanoi, new projects in 2020 sold for more than $1,300 per sq.m. You could find lower prices of $740-950 per sq.m only in distant areas such as Ha Dong, Hoai Duk and Gia Lam. There were several social housing projects priced at $690-820 per sq.m in the Long Bien area.
According to the Vietnam Association of Realtors (VAR), 20 new housing projects entered the Hanoi primary market last year. Low supply kept prices high.
Tran Khanh Quang, CEO of Viet An Hoa Real Estate Investment JSC, said that the complex procedures associated with the acquisition of land for real estate projects limit the supply of housing and force developers to raise prices. Meanwhile, demand is high, especially from speculators.
VAR Deputy Chairman Pham Lam added that in the first months of the last three years, there was a "land rush" in some places, with speculators spreading unfounded rumors about the government's plans to develop the plots and even forging the relevant documents. As a result, land prices have increased by billions of VND.
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