Affordable apartments under VND3 billion ($118,000) have all but disappeared in Hanoi. Photo: Hong Khanh.

Between 2022 and 2023, property prices in Vietnam surged far beyond the income growth of most citizens, as highlighted in a recent National Assembly report. In major cities like Hanoi and Ho Chi Minh City, the mid-range apartment segment has effectively disappeared.

According to the Ministry of Construction's Q3 2024 report, there is a severe shortage of affordable housing (priced under 25 million VND/m²) for the general population, leaving buyers with little to no options in this category.

A decade ago, apartments priced around VND1 billion were readily available in areas such as Ha Dong, Hoai Duc, or Hoang Mai, offering 60m² units with two bedrooms. From 2014 to 2019, the supply of new housing boomed, but since then, affordable apartments have been largely replaced by premium and luxury offerings.

The situation is equally dire in Ho Chi Minh City, where the affordable housing segment has been absent from the market since 2021. By 2022, Hanoi's market showed similar trends, with mid-range and high-end apartments dominating.

Savills Vietnam’s latest data reveals that the primary market price for apartments in Hanoi hit 69 million VND/m² by Q3 2024, marking a 28% year-on-year increase. Meanwhile, household incomes have grown by just 6% annually, creating a growing affordability gap.

Minh Thuy, a prospective buyer in Cau Giay, Hanoi, shared her frustrations after a year-long search: “With 3 billion VND, it’s now impossible to find a new two-bedroom apartment in Hanoi. The best we can afford are one-bedroom units or studios in outer districts, which often start at over 3 billion VND.”

At some newly launched projects, such as one in Dong Anh District, studio apartments (30.5–31m²) are priced between VND3.26–VND3.68 billion VND, exceeding her family’s budget.

The skyrocketing property prices are partly driven by supply shortages stemming from legal barriers. Since 2015, discrepancies between the Housing Law and the Land Law have created significant obstacles for commercial housing projects.

Under current laws, land designated for housing projects must already be classified as “residential land” or a combination of residential and other types. This restriction has stalled hundreds of commercial housing projects nationwide.

In Ho Chi Minh City alone, 126 housing projects have been blocked since 2015 because they did not meet the “residential land” requirement. Developers have incurred heavy losses due to increased costs and missed business opportunities.

In response to these challenges, the government has presented a draft resolution to the National Assembly to pilot new rules for land acquisition and use in commercial housing projects. Key provisions include:

Expanding Eligible Land Use: Allowing developers to acquire agricultural and non-agricultural land (not designated as residential) for housing projects.

Pilot Implementation: Testing these changes over five years in urban areas, excluding zones requiring land recovery.

Provincial Oversight: Empowering provincial governments to approve land transfers and oversee project compliance.

National Security Safeguards: Requiring approval from the Ministry of Defense or Public Security for land conversions involving national security assets.

The draft resolution also mandates that selected projects must increase residential land use by no more than 30% during the planning cycle.

If passed on November 30, the resolution could unlock significant supply in the housing market, addressing some of the current imbalance. However, experts emphasize that regulatory reform alone will not suffice. Careful planning, effective implementation, and close monitoring will be essential to ensure long-term market stability.

For prospective buyers like Minh Thuy, the hope is that these reforms will eventually restore a semblance of affordability in Hanoi’s housing market.

Hong Khanh