Property bull market shies away youngsters’ home owning chances

People under 35 years old contribute up to 36% of the country’s population and they are considered as driving force for the economic growth.

However, youngsters are facing great challenge for housing, especially those who live in Ho Chi Minh City and Hanoi.

Every five years, Ho Chi Minh City’s population increases by 1 million people and there are about 50,000 newly married couples.

Having a population of more than 13 million people, the megacity city has a huge demand of houses.

Data shows that the average housing area per capita of the city is currently only 19 square meter per citizen, significantly lower than the national average of 23.5 square meter a person.

Currently, the city has 21,774 temporary houses erected along canals which need to be relocated. Moreover, the city has 474 apartments built before 1975 awaiting for being rebuilt.

The average per capita income of Vietnam is about $2,600 per year. The number in Ho Chi Minh City is much higher with $6,400.

Statistics of DKRA Vietnam show that, in the past 5 years, housing prices in Ho Chi Minh City increased continuously to 50-60%, bringing the average price from $687 per square meter to $1,074 per square meter.

Meanwhile, the supply of Grade C apartments is declining. In the second quarter of 2019, there was no new project. Young people’s chance of having house has become fewer while new property projects with prices of around $64,500 each apartment are increasingly scarce, said Pham Lam, CEO of DKRA Vietnam.

JLL Vietnam Company commented that the market has more luxury projects with higher price. There are not many affordable housing products for low-income people.

In addition, the policy to limit granting new property projects also causes the scarcity, pushing the price of some areas to an unprecedented high level. Some apartment projects have prices up to $12,900 – 17,200 per square meter.

Other countries are also facing the same situation of Vietnam, they have partly solved this challenge with some long-term plans.

Affordable houses are in huge demand. Photo: nguoitieudung.com

Besides implementing the extensive social housing program, Singapore requires each citizen to set aside a portion of their monthly income to contribute to the Central Savings Fund.

The accumulated money will help young people pay for house purchases, further education or make a partial deduction. The regulation is effective and make the homeownership rate of Singaporeans among the highest in the world, at 90%.

Using multiple taxes is the way Koreans often do. When the real estate market shows signs of overheating, the government has implemented new regulations to limit speculation and raise prices by imposing taxes on real estate transfer profits for owners of multiple properties.

The State needs to have national housing policies and long-term financial support programs for first-time home buyers.

In order to resolve difficulties for building affordable houses for young people, the Ministry of Construction has proposed to allow investors building apartment with an area of 25 square meters.

This proposal is causing some controversy, but it could be a turning point in addressing the essential housing demands of young families.