The median house price in Ho Chi Minh City has reached more than VND7 billion ($296,000), 32.5 times higher than the average annual household income of just VND217 million ($9,110), according to a report by Singapore-based research firm The Urban Land Institute (ULI).
House price-to-income ratio tops Asia
According to the ULI's 2023 Asia Pacific Home Attainability Index report, Ho Chi Minh City and Hanoi have two of the highest median house price-to-income ratios in Asia.
HCMC ranks second in Asia in the house price-to-income ratio, at 32.5, just behind China's Shenzhen city (35) and even higher than major cities like Beijing and Shanghai (China), Seoul (South Korea) and Tokyo (Japan).
The ratio is 18.3 in Hanoi, where the median home price is $182,300 per unit, 38% lower than that of HCMC. Meanwhile, the ratio is 17.3 in Seoul, 16.1 in Tokyo and 13.7 in Singapore.
According to property consultancy firm Savills Vietnam, Vietnam's current urbanization rate of 28% depicts the ongoing movement to major cities and neighboring localities, driving housing demand, especially in big cities such as Ho Chi Minh City, Da Nang and Hanoi. However, this increasing demand often conflicts with affordability, creating a complicated housing picture.
Affordable housing is defined as housing that fits people’s incomes and financial capacity. Currently, affordable housing products in the market are known as Grade C apartments, affordable land plots or even workers' houses near industrial parks.
In recent years, affordable housing supply has been scarce, although this segment has particularly strong demand. In the first half of this year, Grade C apartments accounted for 4% of total supply and 62% of total consumption in HCMC.
It is expected that in the second half, about 3,295 new Grade C apartments will be put up for sale, equivalent to 39% of the city’s total supply.
The southern economic hub is suitable for young high-income workers or foreigners working in Vietnam as its average monthly apartment rent is $592.
Experts say that rent is only considered affordable when housing costs account for about 30% of a person's total monthly income. Meanwhile rental returns from affordable housing products such as worker housing are relatively low, so demand and occupancy rates are high.
Affordable housing the only choice
Giang Huynh, head of Research & S22M, Savills Advisory Ho Chi Minh City, said that most people in HCMC can only afford Grade C apartments.
However, there is a relatively low supply of affordable apartments priced from VND2-4 billion ($83,963-167,926). Previously, this product line accounted for about 60% of the market's supply, but now it makes up only 25%. Limited supply makes it difficult for people to own a house.
Therefore, the government’s support policies are the key to solving the "problem" of housing affordability, she said, adding the experience of many different countries has showed the positive effects of housing solutions on socio-economic development.
This expert said unlike social housing with strict planning requirements and a profit limit of 10%, private investors are still able to build affordable housing for profit. China and India have thriving affordable housing and worker housing markets which are lucrative for private investors.
“But, in Vietnam, developers have been looking for opportunities in other segments and are yet to tap the affordable housing segment,” she noted.
She cited Singapore, where a program run by the Housing & Development Board (HDB), combined with the new loan policy of the Central Provident Fund, has successfully raised the home ownership rate to nearly 90%.
Giang Huynh said that Vietnam can move towards a more accessible and affordable housing market if it creates a favorable environment for both investors and buyers. In particular, the government should consider taxes to limit speculation and increase the land fund for low-cost housing development, demonstrating its commitment to promoting a stable and sustainable housing market that benefits home buyers.
As for social housing, experts emphasized that this segment needs to be prioritized, helping to solve the housing problem for low-income earners, stimulate socio-economic development, speed up population density reduction and expansion of urban areas to suburban areas, and increase sustainability in urban planning.
"The biggest difficulty right now is the land fund for social housing, followed by capital. Currently, investment mainly depends on state capital, so it needs more support from the private sector. Especially, there should be effective policies to simplify legal procedures for businesses involved in social housing," said Giang Huynh.