Research data from the Vietnam Association of Realtors (VARS) shows that the affordable apartment segment (priced under VND25 million/m2) - affordable housing - has become "extinct" in the past few years and is very difficult, or even impossible, to reappear in Hanoi and Ho Chi Minh City.
VARS statistics show that in the period of 2018 - 2023, not only has the quantity of apartments continuously decreased, but the structure of apartment supply in the two special cities has also become increasingly unbalanced. The supply structure is increasingly "leaning" towards the high-end and luxury segments. The proportion of newly opened apartment supply in the affordable price segment (under 25 million VND/m2) has continuously decreased and officially "disappeared" in Ho Chi Minh City in 2021, and in Hanoi in 2023.
Until the first 9 months of 2024, the supply of apartments in Hanoi witnessed a significant recovery, but the imbalance between supply and demand became even more serious when about 80% of the supply of apartments opened for sale in Hanoi and Ho Chi Minh City in the first 9 months of 2024 had a selling price of VND 50 million/m2 or more.
Despite the high price, newly launched projects or new launches have achieved very good sales rates because the demand for apartments, both for living and investment, has always remained high and on an upward trend. Some apartment projects recorded absorption rates of up to 99% right at the time of official launch.
This situation causes apartment prices to continuously increase and establish a new level, at a high level in both the primary and secondary markets, far beyond the affordability and income growth rate of the majority of people.
Research on the apartment price index, reflecting the average selling price fluctuations of projects in the sample set of 150 projects selected and observed by VARS, also shows that, as of the third quarter of 2024, the average selling price of the sample project cluster in Hanoi is close to 60 million VND/m2, an increase of 64% compared to the second quarter of 2019.
The average selling price of the project cluster in Ho Chi Minh City increased from VND49.2 million/m2 to VND64.2 million/m2, reflecting an increase of 30.6% compared to the base period.
The Vietnam Real Estate Brokers Association believes that it is difficult for affordable housing to "appear" in the central areas of Hanoi and Ho Chi Minh City, because the number of housing projects approved for investment in recent years can only be "counted on the fingers". In 2023 and early 2024, there will be almost no new projects in the affordable housing segment being implemented, and real estate projects being implemented mainly focus on the high-end segment.
According to VARS, the main reason why affordable housing does not receive much attention from real estate developers is because the profit margin from this segment is lower than that of high-end segments.
To build affordable housing, developers must optimize costs from land fund, construction to operation. Meanwhile, calculations by project developers show that with a profit margin of only about 15%, if capital is stagnant for 1-2 years or sales are delayed for 1-2 years, developers will lose money.
Moreover, central land is increasingly scarce, currently and in the future it is mainly located in large urban areas with a series of infrastructure and public utilities that need investment, plus input costs, especially land costs, are increasing, prices cannot be affordable.
