Urban millennials find house ownership a pipe dream

Returning to Vietnam after studying abroad for five years, Hoang Minh has been able to land a good job with remuneration that allows him to live comfortably in the crowded city of Hanoi.

But his dream of owning an apartment is nowhere near being realized.

"I used to think that in a couple of years I would be a homeowner, but this goal is becoming more and more difficult to achieve," the 24-year-old said.

With a monthly salary of around VND20 million ($869), higher than most of his friends, Minh has calculated that it would take him around 20 years to pay off a VND2.1 billion two-bedroom apartment, only if his parents are willing to give him a considerable upfront payment.

However, "I don’t want to be in debt for such a long time," he said.

In HCMC, 26-year-old Hien is also finding that rising property prices are pushing her dream of becoming a homeowner further and further away.

With a current salary of VND15 million a month, she said that the only way for her to buy an apartment would be to find a job with much higher income and borrow from her parents.

"I don’t think I’ll be able to buy property in the city. The best I can do is move to a neighboring province."

The shortage of affordable housing in Hanoi and HCMC is a disappointment for many young people like Minh and Hien.

Social housing demand among low-income earners in urban areas and workers in industrial parks in the 2021-2025 period is estimated at 294,600 apartments. It would take around VND220 trillion ($9.57 billion) to build them, according to a report released in October by the Ministry of Construction.

Most market research companies put the threshold for the affordable segment at VND25 million per square meter.

Despite such demand, just one percent of new apartment supply in HCMC was in the affordable segment, as opposed to 70 percent in the high-end segment, according to the Ho Chi Minh City Real Estate Association (HoREA).

HoREA Chairman Le Hoang Chau said recently that the imbalance between high-end and affordable segments despite high demand for the latter was alarming.

The situation has shown no improvement this year. Not a single apartment among the 371 new units launched in HCMC in October was in the affordable segment, according to a report by real estate consultancy DKRA Vietnam.

"The shortage of Grade C (affordable) apartments is continuing and would likely persist as most projects planned for year-end launch are in the mid-price and high-end segments," the report said.

It said 79 percent of the new supply in October was in the Grade A (high-end) segment and the rest were luxury apartments.

Although the Covid-19 pandemic has caused demand for properties to fall, HCMC and Hanoi still saw apartment prices rising 9 percent and 8 percent year-on-year respectively in August, according to real estate listing platform Batdongsan.com.

Batdongsan.com director Dinh Minh Tuan said that although social distancing due to Covid-19 has shifted a lot of investment from real estate to the stock market, it was a temporary trend, since investors were holding on to properties and waiting to buy again after the pandemic ends.

"This means prices are not likely to fall anytime soon," he added.

The average income of residents in Hanoi and HCMC is VND8.7 million and VND8.9 million a month respectively. This means that to own a VND1.5 billion apartment (one of the cheapest in the two cities) with half of their income paid as installment, an average person would have to pay up for 25 years.

Officials have acknowledged the issue but have not been able to come up with a workable solution.

The Ministry of Construction has proposed that VND65 trillion ($2.8 billion) in credit be provided to support developers of social housing and buyers of affordable property, but no final decision has been made on it.

HCMC has targeted building one million apartments by 2025 to replace aging and low-quality housing for low-income people, but some experts are concerned that existing blockages will make the goal unachievable.

Su Ngoc Khuong, senior director of real estate service firm Savills Vietnam, said that developers struggle with the process of acquiring cheap land to build affordable housing, and therefore, it would be more feasible if HCMC authorities provide the land for them.

As the land fund in core districts has depleted, the city could consider non-central districts like Binh Chanh and Hoc Mon to develop social housing, he said.

The city could sell the affordable apartments with a long repayment periods of 30-50 years as a way to keep workers committed to the city instead of returning to their hometowns, like it happened in the last several months, Khuong said.

"With quick approval, cheap land and a profit margin of 7-10 percent, I believe that many developers would be willing to begin work."

As officials and experts try to figure out what seems to be an elusive solution, Minh sees no choice but to look for an apartment for rent as he prepares to get married next year.

"My fiancé and I have decided that renting is the wiser decision. For us, buying a house is unrealistic."