HCMC increasingly short of affordable apartments amid growing demand

After nine months of searching on the primary market, Bich Nguyen, an accountant for a food products supplier in the city’s District 1, has not found her ideal apartment, a two-bedroom unit not too far from downtown.

She says her budget is VND2.5 billion but most apartments she has seen cost more than that.

At a building in Binh Tan District’s An Duong Vuong Street, a 48-square-meter apartment with one bedroom costs VND2.8 billion, while the cheapest two-bedroom apartment measuring 58-63 sq.m costs VND3.1-3.3 billion.

At another place on nearby Vo Van Kiet Street, all two-bedroom apartments measuring more than 62 sq.m are priced at above VND3 billion.

According to a real estate broker, the two buildings have the cheapest apartments in the area.

"These prices are way above our budget, so we had to look at another area," Nguyen says.

In the city’s east, apartments are even more expensive at over VND50 million per square meter.

Even on Vanh Dai 3 Street, apartments in good locations cost at least VND3 billion.

Hoa, 35, of Tan Phu District, is also looking for an affordable apartment in HCMC and her budget is only VND2 billion.

Last week she went on an apartment tour in an urban area on Tan Phu’s Bo Bao Tan Thang Street and 80-square-meter apartments there cost around VND3.9-4.3 billion.

Smaller ones of 55-60 m2 cost only VND2.5-2.7 billion but usually come with legal risks.

Another place that Hoa is eyeing is an old building on Tan Phu’s Luong Minh Nguyet Street with several 60-66 m2 apartments on sale for VND2.9-3.2 billion.

She says with a sigh: "Three years ago prices of apartments in this building were VND30-32 million per square meter but I did not have enough money then. Now they have jumped to VND45 million.

"Your income inches up while property prices skyrocket, and so I could never afford a house no matter how hard I work."

According to data from real estate consultancy Batdongsan, demand for apartments costing less than VND40 million per square meter was very high in the third quarter, but there was only one new apartment project at that price point with the rest costing VND45-80 million.

Duong Thuy Dung, COO of property consultancy CBRE Vietnam, says in the first 10 months of this year there were no affordable apartments built in HCMC and 96% of those on sale were in the premium segment and cost at least VND61 million.

In the case of projects planned for 2024, 71% are premium, 16% are mid-priced (below VND46 million) and 12% are affordable (under VND23 million).

The number of mid-priced and affordable apartments has been declining for the past three years, according to CBRE.

The two segments made up 70% of housing supply in 2019 but have been falling dramatically as developers switched their focus completely to the pricier segments.

In the event, they fell to 20-30% in 2020 and 2021, 6% in 2022 and 16% in the first 10 months of 2023.

Since 2020 premium housing has accounted for 70-80% of new projects and mid-priced ones for the rest, according to a report by the Vietnam Association of Realtors.

"Mid-priced and affordable apartments have great demand but their supply is low," Dung says.

Statistics from another property consultancy, Cushman & Wakefield, show that the prices of apartments have tripled in the past decade.

Le Hoang Chau, president of the HCMC Real Estate Association, does the math for buying housing: "Housing prices are way too high in comparison to the city’s average income.

"To buy a VND2-3 billion apartment, if taxpayers in the first bracket [with taxable monthly income of less than VND5 million] somehow manage to save VND100 million a year, it will take them 25 years to buy a house."

But they do not qualify for social housing.

Tran Xuan Ngoc, CEO of property developer Nam Long, says despite the growing demand for housing, the number of purchases has been declining for a while, mainly because of imbalance between supply and demand.

Home buyers want affordable properties but cannot find any on the primary or secondary market, he says.

He suggests building more social housing for low-income people.

Chau believes legal hurdles and tortuous administrative procedures are increasing construction costs and so should be resolved or simplified to make housing more affordable.

Changes to the laws made in 2023 have increased profit margins on social housing to 20% from 10%, a move that will attract more developers to the social and affordable segments, experts say.

If the government can also remove the legal hurdles, the market might soon see more cheap housing, they add.