Survival a battle in Vietnam’s most expensive city

Shoppers at a market in Hanoi’s Bac Tu Liem district, April 6, 2024. Photo by VnExpress/Phan Duong

Thao and her family used to rent a home in the Nam Tu Liem district for VND3 million (US$120) per month, and they would spend an additional VND1 million on utilities.

But after the government’s utilities price adjustment in July last year, both her family’s rent and electricity and water bills have increased. She’s also watched grocery costs rise by about 15% since last year, mainly due to increased prices of essential items and gas.

With Thao’s daughter entering first grade and her son reaching preschool age last year, the total tuition fees for the two children also increased by an additional VND3 million compared to before.

Additionally, her family incurred substantial extra costs to enroll their children in public schools, which typically offer lower tuition fees for local residents. This is because they rent their home in Hanoi and do not possess a local residence registration book.

"My family managed to make ends meet with a total monthly income of about VND18 million before, but since everything started to increase, we are short every month," lamented Thao, 35.

Thao’s story demonstrates the results of the 2023 Spatial Cost of Living Index (SCOLI) report by the General Statistics Office, which indicated that Hanoi has the highest cost of living in Vietnam.

Data from the Hanoi Statistical Office also shows that the average Consumer Price Index (CPI) for the first two months of this year increased by 5% compared to the same period last year, with eight out of 11 CPI groups showing increases. That includes education costs rising 38.33%, while housing, electricity, water, fuel, and building materials increased 5.24%. Food and food services were up 2.92%, and other goods and services rose 7.38%.

According to Dr. Ngo Tri Long, former head of the Price and Market Research Institute under the Ministry of Finance, Hanoi’s cost of living is even higher than several more developed cities around the world.

"The real estate prices have skyrocketed in the last two years, leading to increases in both house purchasing prices and rental costs, for both homes and shops, hence the overall price increase," he said.

Meanwhile, the 2023 Total Remuneration & Benefits Survey conducted by the human resource consulting firm Talentnet based on a survey of 638 companies nationwide showed that the basic salary level in Hanoi is 12% lower than that in Ho Chi Minh City. Even when compared to other more rural Southern provinces, it’s lower by 10%.

Long also noted that another important aspect to consider is the differences between nominal and real wages.

Nominal wages are the amount of money workers receive from their employers each month. Real wages, meanwhile, are wages that have been adjusted for inflation, representing the actual amount of goods and services that can be bought with that amount, according to the United Nations’ Economic and Social Commission for Western Asia.

"Prices are increasing faster than wages, thus negatively affecting people’s lives, especially the poor, unemployed, and salaried workers whose incomes have decreased post-pandemic," Long said.

In fact, after every wage increase policy, market prices almost immediately escalate and the wage increments often do not compensate for inflation. And, ironically, many struggling families like Thao’s do not fall into the group that receive the wage increases.

‘Backed into a corner’

After giving birth to her second child three years ago, Thao quit her job as a supermarket cashier to take care of her children and operate an online business because her salary "was not enough to cover" the fees for her children’s schools.

Her husband Minh earns his income through construction, primarily depending on commissions from his projects. Due to industry fluctuations post-Covid-19, his income has been halved since two years ago, leading him to take up additional work as a motorcycle taxi driver.

"With our efforts, our accumulated income hasn’t decreased, but all our expenses have increased," Minh said.

Just an increase in gas prices and petrol costs made the couple feel "backed into a corner."

Thao now waits for her children to fall asleep every sweltering summer night so that she can turn off the air conditioner and switch to a fan to save money.

According to a survey by the Institute of Workers and Trade Unions, in the first half of 2023, average monthly expenditures in six provinces and cities including Hanoi, Hai Phong, Phu Tho, An Giang, Binh Duong, and Ho Chi Minh City were VND11.7 million, an increase of 19% compared to 2022, while incomes remained at VND7.8 million only.

A report by the auditing firm PwC on consumer habits in Vietnam in 2023 also noted that 62% of Vietnamese consumers said they had been forced to cut back on non-essential spending.

VnExpress interviews with dozens of young families revealed that most of those that manage to stay in the capital need to receive support from their parents. This help frequently comes in the form of financial aid or affordable food sent from the countryside, enabling them to get by.

Food that Thu Hang’s family in Hanoi's Ha Dong district receives from her parents in the countryside on April 7, 2024. Photo courtesy of Hang

Hang’s three siblings and their families gathered at her home in Ha Dong district on April 7 to divide the food sent from their parents in the countryside.

The siblings received calls from their parents a few days earlier, asking what they wanted to eat. The result was a 50-kilogram bag of rice and two boxes of meat, fish, eggs, vegetables, and local specialties like fish sauce, banh cuon (steamed rice rolls), and nem chua (sour fermented minced pork) delivered from their hometown, the northern province of Thanh Hoa, where these items are less-prohibitively expensive.

"Each family got an additional bag of herbs, chili, and lemon," said Hang, 38.

Hang explained that after she and her siblings got married and relocated to Hanoi, their mother began visiting the capital to help care for her grandchildren. But then, clearly feeling the high living costs in the capital firsthand, the elderly woman decided to additionally support her children in this way, hoping to help her children alleviate financial pressure with cheaper food.

Hang said her mother was shocked to find a bundle of Malabar spinach priced at VND17,000 along with pig trotters at VND110,000 per kilogram in Hanoi. In the countryside, two bundles of Malabar spinach cost VND5,000 and pig trotters cost VND30,000 per kilogram.

"A bowl of pho in the city is even three times more expensive than at a countryside market," she said.

Thanks to the regular food support from her parents’ self-raised chickens and self-planted vegetable garden, Hang’s family of four only has to spend an additional VND5 million on food and groceries each month now.

"We’re so grateful for my parents’ support over the years," Hang said. "My husband and I have even managed to buy a house on installments and raise two children on a modest civil servant’s salary."

Exodus

The significant differences in prices and costs between regions has prompted a trend of residents leaving the city to return to the countryside. On various online communities, many people have reported significantly reduced living costs once they left Hanoi or Ho Chi Minh City for more affordable coastal areas of Central Vietnam or the Central Highlands.

As observed by VnExpress reporters, one family reported saving more than half on their expenses since moving from Hanoi to the coastal city of Da Nang in 2023. Their biggest saving was in education costs, which dropped by 70% because Da Nang waives tuition fees. The only educational expense they incurred was for extra classes, which were also less costly than those in Hanoi. Food costs were reduced to two-thirds of their previous expenditures as well.

Similarly, Tan Nguyen, a 37-year-old father of three, who moved from Hanoi to the coastal city of Nha Trang at the end of 2022, said he’s now saving a third on his previous living expenses.

"If we sent our children to public schools or rented a cheaper house, we could even save half," he said. "Meanwhile, fresh and affordable food and clean air have improved my entire family’s health, reducing medical expenses."

Dr. Long noted that the government could implement measures to solve the challenges citizens face due to the high cost of living. Firstly, ensuring that people’s real wages are sufficient to meet their living expenses is crucial, and increasing salaries is just one aspect of this strategy, he explained.

Secondly, appropriate tax and financial policies should be introduced, Long added.

Thirdly, one of the most practical solutions to the problem is to pay attention to price control when wage increase policies are introduced, to prevent prices from rising above wage hikes. Measures must be taken to stabilize prices while improving the quality of goods and services, Long argued.

Additionally, personal finance advisor Lam Tuan, a member of the Vietnam Wealth Advisors, recommended that individuals keep a record of all daily and monthly expenditures to have a clear view of the family’s financial situation, thereby enabling them to prioritize spending according to necessity.

Staying in the city and buying a house were once Thao and Minh’s dreams.

But in the constant struggle to pay for rent, utilities, and monthly baby supplies, those dreams have faded.

After half a year of living hand to mouth, at the end of 2023 the couple decided to go their separate ways. Thao took their two children back to her husband’s hometown in the northern province of Nam Dinh and started living with her in-laws, while Minh continued to cling to his hopes of a better life in the capital.

Thao mentioned that living with her parents-in-law wasn’t entirely comfortable but was more bearable in terms of financial pressure.

"Since my wife and children moved to Nam Dinh, I’ve been living at the construction site," said Minh. "I’m trying to work overtime for a few more years to save up some money to go back to the countryside and build a house."