VietNamNet Bridge – The rate of housing price in proportion to income of the Vietnamese is between 24.5 to 26.6, very high compared with other countries in the world. Most state employees can’t afford to buy a house just relying on theirsalary.

 

A comparison with other regions in the world illustrates how high this rata is: 6.25 for South Asia, 4.14 for East Asia, 2.21 for Africa, 6.25 for Europe, the Middle East and North America and 2.38 for Latin America and the Caribbean.

 

Nguyen Manh Ha, Chief of the Ministry of Construction’s Agency for Administration of Housing and Estate Market, explains that the rate indicates the proportion between the average price of a house in comparison with the annual income of each person.

 

This means that state employees in Vietnam have to fast and save their salary for 24.5 to 26.6 years to be able to afford a house. According to the United Nations, people in the world need 3-4 working years on average to buy a house.

 

Nguyen Thanh Hai (from the northern province of Thai Nguyen) and his wife are working for state-owned agencies in Hanoi. They earn a total of VND8 million ($400) a month. After for daily expenditures, which they keep at a modest level, they save around VND2 million ($100)/month. Though Hai has been working for over ten years, he cannot afford a house in Hanoi.

 

Hai says in the next five years, if he and his wife still live on their salary, they will still have to rent a house because the prices for real estate in Vietnam keep rising very fast. The salary increases can’t keep the pace.

 

“Two years ago, I needed another VND600 million ($30,000) to buy an apartment but now I would need over VND1 billion ($50,000). Becoming an owner of a house is out of my reach,” Hai complains.

 

According to the Ministry of Construction’s Draft Strategy on Housing Development for 2020 with the vision to 2030, the state has been adding housing fees to salary since 1991 to enable state employees to buy houses. However, the fee accounts  for 8-10 percent ofa  total salary while the rents and the prices for housing are getting higher. State employees, workers at industrial zones and low-income earners in cities are unable to buy houses.

 

Deputy Minister of Construction Nguyen Tran Nam said that the housing price in Vietnam ranks 20th in the world while the country ranks 100th in terms of prosperity.

 

“In Vietnam, nobody can buy a house in big cities just relying on their salaries, they can’t even afford houses for low-income earners,” Nam says. He explained that people who earn several million dong a month, save around VND1 million ($50) only while the price for an apartment is at lest over VND1 billion ($50,000). Apartments designed for low-income earners in Hanoi and HCM City are at least VND400 million ($20,000).

 

Housing fee too low

 

The Ministry of Construction said that since the state replaced  house allocation with the housing subsidyit has not invested in housing development. The housing fees added to salary are too low compared to the market price of houses.

 

Since Vietnam carried out the salary reform in 1993, when the minimum salary was set at VND120,000/month with housing fees at VND9,000, the latter account for 7.5 percent of salary. While The minimum salary has risen to VND730,000 ($37)/month at present, the housing subsidy is only VND54,750 ($26).

 

Some say that the housing prices are high because the supply in urban areas is very small. Dang Hung Vo, former Deputy Minister of Natural Resources and Environment, says that this is the consequence of estate speculation.

 

“The estate market is not transparent. The intermediaries between investors and people who need housing make big money. The  prices exceed the real values and the financial ability of a majority of,” Vo says.

 

Housing saving fund

 

Vietnam has sped up the construction of houses for low-income earners in the cities and for workers at industrial zones but the demand for housing is still high.

 

The Ministry of Construction has proposed solutions on housing development, including financial solutions such as establishing the estate trust fund, housing development fund and housing saving funds.

 

The housing saving fund aims to assist low-income earners. Capital for the fund will be raised from their salary at a fixed ratio (from 3-5 of 10-15 percent in other countries).

 

The fund will be used to build houses to be sold or rentedat low prices. Those who deposit their money at the fund will be allowed to purchase house with their savings. If they don’t want to buy house, they will take back the original sum plus the interest money when they retire.

 

This model has been applied in many developed countries.

 

Deputy Minister Nam says that there are nine million workers. If they pay only one percent of their salary to the fund, the fund will be huge.

 

PV