Affordable housing on verge of extinction in Vietnamese market: forum

Affordable housing, defined to have a price of less than VND25 million ($1,060) per square meter, is almost "extinct" in the Vietnamese market, especially in big cities like Hanoi and Ho Chi Minh City, heard the Spring Real Estate Forum held in Hanoi.

The average primary asking price of apartments in Hanoi has increased for 20 consecutive quarters to VND58 million ($2,363) per sqm, while in Ho Chi Minh City, apartments priced under VND2 billion ($81,000) per unit are no longer available.

The above prices are considered "affordable" because there is no supply of lower prices, but there is no clear concept of affordable housing. According to the Ministry of Construction, affordable apartments have prices ranging from VND25-30 million ($1,060-1,270) per sqm, mid-end apartments VND30-50 million, and high-end apartments over VND50 million ($2,116).

The Vietnam Association of Realtors (VARS) said that it is possible to point out some characteristics of affordable housing by comparing it with social housing and based on the reasonableness of housing prices.

A reasonable housing price is determined when each household can balance housing costs and other living expenses within their income, it said, adding that according to the calculations in many countries, housing is “affordable” when housing costs account for no more than 30% of the household's total income.

However, VARS held that currently, it is difficult to develop apartment projects with prices in the above range, especially in Hanoi and Ho Chi Minh City where housing demand is very high.

Speaking at the fourth Spring Real Estate Forum on Friday, Doan Van Binh, vice chairman of the Vietnam Real Estate Association (VNRea) said that an affordable price for an apartment is about VND25 million ($1,060) per sqm. So, a 65-sqm two-bedroom apartment costs about VND1.6 billion ($67,720).

However, according to the association's research, prices of affordable housing in Hanoi and HCMC have increased by 20-30% to between VND2-2.4 billion ($101,590) per unit, he said.

At a meeting with Prime Minister Pham Minh Chinh on Thursday, the HCMC Real Estate Association (HoREA) proposed allowing houses priced at VND35 million ($1,269) per sqm to access a preferential loan package of VND120 trillion ($5.08 billion).

“The concept of affordable housing has changed greatly, no longer at $1,000 per sqm but maybe double,” Binh noted.

State engagement needed to create affordable housing

Regarding solutions to develop affordable housing, Binh said that it is necessary to perfect relevant policies and laws as well as introduce the concept and set criteria to determine affordable housing. "Regulations on affordable housing should be integrated into the legal system, with a focus on policies to encourage the development of this segment."

He also stressed the need to have mechanisms for awarding and accumulating bonus points for developers who create affordable housing when choosing investors to build higher-segment commercial housing projects.

“There should be a policy to control affordable housing ceiling prices, including selling prices and rental prices,” he added.

If the "invisible hand" of the market is allowed to adjust prices, affordable housing will remain scarce. Therefore, the state should directly participate in creating affordable housing and social housing for rent to lead and regulate the market, Binh emphasized.