Ministry of Construction to reduce housing prices, paving way for VND20 million/m2 apartments

The Ministry of Construction (MOC) has joined forces with a number of ministries and branches to draft a government resolution on solutions to encourage the development of low-cost commercial housing projects.

Ministry of Construction to reduce housing prices, paving way for VND20 million/m2 apartments

Low-cost commercial housing projects are projects with apartments with an area of less than 70 square meters and selling prices of no more than VND20 million per square meter.

Commenting about the real estate market, MOC said most real estate firms focus on commercial housing projects targeting moderately high and high income earners. This has resulted in an oversupply of high-end products, and a shortage of social housing and low-cost commercial housing products (priced at below VND25 million per square meter).

To date, the number of social housing projects is equal to only 42 percent of the target set by the national housing development strategy.

MOC estimates that people’s demand in the mid- and high-end housing market segment (priced at VND25 million per square meter and higher) accounts for only 20-30 percent of total demand, while demand for more affordable products (less than VND25 million per square meter) accounts for 70-80 percent.

The house prices in urban areas are much higher than people’s incomes, and apartments valued at VND1-2 billion are disappearing from the market.

Le Hoang Chau, chair of the HCM City Real Estate Association (HOREA), said a mid-end apartment with two rooms is priced at VND2.5 billion (VND35 million per square meter), or 20 times higher than the average income of households and families who can save VND8-12 million a month a year.

Meanwhile, affordable apartments, valued at VND2 billion or less (VND25-30 million per square meter) and social housing apartments are nearly unavailable in HCM City.

The MOC Minister, in a report to the National Assembly, said that real estate prices, especially housing products, remain unstable, do not truly reflect the real value of real estate, and do not fit the affordability profile of the majority of people.

Experts say that housing prices will be considered reasonable if the profit from leasing was approximately the bank deposit interest rates.

In an effort to minimize the imbalance in the structure of the real estate market and satisfy market demand, the government in May 2020 promulgated Resolution 84 on the tasks and solutions to settle difficulties for production and business, accelerate public investment disbursement, and ensure social order and security in the context of Covid-19.

Policies

MOC has been assigned to draw up a government resolution on solutions to encourage the development of low-cost commercial housing projects (apartments with less than 70 square meters and selling prices of no more than VND20 million per square meter).

 
MOC has been assigned to draw up a government resolution on solutions to encourage the development of low-cost commercial housing projects (apartments with less than 70 square meters and selling prices of no more than VND20 million per square meter).

According to MOC, this is a new policy related to many laws, such as the laws on planning, investment, construction and housing.

MOC has joined forces with relevant ministries and branches to research and draft the resolution. It has consulted with the Ministry of Justice on issues related to preferential policies.

In terms of planning, it is necessary to arrange the land fund, allow housing projects that do not use up to 20 percent of land reserved for social housing to use land to build low-cost commercial housing; and allow delays of the land use fee payment for no more than 24 months after the state allocates the land.

Regarding capital mobilization, developers are allowed to issue corporate bonds to raise funds to implement projects for low-cost commercial housing and borrow preferential capital from the Vietnam Development Bank.

According to the Hanoi Construction Department, the city has fulfilled the housing development program in 2011-2020. As of December 2020, the average housing area in the city had reached 26.8 square meters per head, higher than the target set for 2020 (26.3 square meters).

In 2020, five housing projects in Hanoi were completed with the total floor area of 550,281 square meters, or 5,348 apartments, 89 commercial housing projects (6,571,944 square meters of floor area), 53,644 apartments and 5 resettlement housing projects (154,270 square meters of floor area, 1,723 apartments).

In HCM City, the local construction department reported that 31 projects in 2020 were certified by the department as meeting requirements to mobilize capital for products to take shape in future, with a total of 16,895 products, down by 30.4 percent compared with 2019.

Of this, 7,114 products belonged to the high-end market segment, accounting for 42.1 percent, up by 15.9 percent compared with 2019. There were 9,618 products in the mid-end segment, accounting for 56.9 percent, up by 66.2 percent.

There were only 163 affordable housing products, accounting for 1 percent, a sharp fall of 98.6 percent compared with 2019. 

Hong Khanh

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