Buying first home remains a pipe dream for young Vietnamese

Pham Hoai Nam used to think that being a grown-up means having a stable job, a good salary, a beautiful girlfriend, and his own house.

Now, at age 28, he is able to check off all of those items except the last one.

"My girlfriend and I plan to get married next year, and our only major concern now is finding a place to live," Nam, who works as an electronics salesman in Hanoi, says.

He is among many young Vietnamese in major cities who are finding that their dream of owning a home is becoming increasingly elusive as real estate prices rise faster than incomes amid a decline in affordable apartment supply.

A young person might have to save for two decades to buy their first house in Ho Chi Minh City, Pham Lam, CEO of real estate firm DKRA Vietnam, said at a recent forum.

In the country’s largest city, where per capita income last year was $6,300, or $525 a month, the country’s highest, the cheapest homes cost around VND1.5 billion ($64,500), he said.

"Without financial support from their family, a young person would find it very difficult to buy their first home."

Data from DKRA shows that prices of grade C, or affordable, apartments have increased by 50-60 percent in the last five years as supply dwindled.

They have risen from VND16 million ($688) per square meter in 2015 to VND25 million ($1,075) now.

Grade C apartments accounted for 30 percent of supply in 2016, but have almost fallen to zero as of September this year.

The supply of affordable apartments has been declining because investors typically focus on premium projects which are more profitable, the Ho Chi Minh City Real Estate Association said in a recent report.

Social housing projects struggle to get completed for various reasons including a lack of credit. Since a VND30 trillion ($1.3 billion) line of credit extended by the government to revitalize the real estate sector ended in 2016, over 200 social housing projects have been left unfinished in the country, according to a recent report submitted to the National Assembly by the Ministry of Construction.

In Hanoi the average apartment price had risen by 30 percent since 2014 to $1,300 per square meter last year, according to real estate firm Savills.

These price tags intimidate young people. Nam, who has a monthly salary of VND20 million ($860), or 2.5 times the Hanoi average, struggles to find a way to buy a VND1.4 billion ($60,200) one-bedroom apartment in the southern Cau Giay District.

Living with a friend in a rented place which costs him about VND4 million ($172) a month, he is able to save only VND8 million ($344).

He says wistfully that by the time he is able to buy a house, "I might have 2 kids and will need a house twice the size and price."

Even getting mortgages is a challenge. Lam estimated at the conference that a person with a VND15 million ($645) monthly salary in HCMC would have only VND3.8 million ($163) left if they have to pay off their mortgage after putting half the money for the house upfront.

Ngo Quang Phuc, CEO of real estate firm Phu Dong Group, said a person must have a salary of VND20 million ($860) a month to spend half of that on paying off the mortgage.

Real estate expert Dang Hung Vo said one of the reasons for the surging prices is speculation.

"Vietnamese residents are free to own multiple real estate units without any major consequences, and this should be restricted with a second-home tax policy."

In developed countries, banks have many credit options to support low-income buyers of first homes, while in Vietnam this is still very new, he said.

He proposed that the government should involve private investors in housing for low-income people instead of relying on public funding, which is limited.

However, Lam said young people could still afford first homes if they were willing to move to non-central business districts, where properties are cheaper, albeit far away from their work places. They can move later to more expensive homes that are closer to downtown areas, he added.

According to some real estate experts, first home ownership is not only a challenge for Vietnamese residents but also for those in developed countries. Saving for a down payment in top U.S. cities takes 27 years on average, real estate firm Unison said in a report released in June. 30 percent of millennials thought they were more likely to win the lottery than own a home, its survey found.

Young Vietnamese do have the option to turn to their family for support. Tran Hoai Thuong, 30, manager at a backpacker hostel in downtown Hanoi, got married and together with her husband bought a VND1.7 billion ($73,100) apartment, with 70 percent of the money provided by parents on both sides.