Housing prices still pricey despite tepid market activity

Though housing market activity remains tepid, people increasingly find the cost unaffordable.
Housing prices are still pricey despite tepid market activity.

Housing prices are still pricey despite tepid market activity.

Many meetings were convened to discuss solutions for long-term difficulties in the real estate market in the past time, but housing prices are still so pricey that people can’t afford homes.

The Ministry of Construction has just released information on the housing and real estate market nationwide in the second quarter of 2023, showing that the prices of apartments in Hanoi continued to increase in the second quarter, especially in projects in Tay Ho district and surrounding areas. The square meter price in Hanoi is about VND80 million- VND100 million (US$3,329 - $4,158).

In Ho Chi Minh City, apartment prices increased by 2 percent-3 percent in some projects compared to the same period meanwhile, according to property consultancy Savills Vietnam’s report about the real estate market in the southern metropolis in the first half of 2023, the average income of a family is only about VND15 million per month while the average apartment price in a current project is VND5.5 billion-VND6 billion. The difference between city dwellers’ income and housing costs is more than 30 times. Worse, mid-priced and low-priced apartments have almost disappeared from the market.

In mid-February 2023, the Prime Minister chaired an online conference on solving difficulties for real estate. In early August, the Prime Minister once again presided over an online conference to evaluate the implementation of the Government’s Resolution 33 proposing solutions to remove difficulties and obstacles for the real estate market. Following the Government’s direction, administrations in localities such as Ho Chi Minh City, Dong Nai, and Binh Thuan have step by step helped property businesses remove difficulties.

In addition, the Government also urged the State Bank to request commercial banks to lower lending rates and pump capital into the economy. The government both removed legal hiccups for housing projects and pulled the loan interest rates down. Nevertheless, these efforts have not been able to bring house prices down whereas, the financial statements of some real estate companies listed on the stock exchange revealed that these companies gained quite huge profits. Is it not really difficult for businesses to restructure themselves and lower the selling price of house and land products?

In the previous crisis in the real estate market from 2012 to 2014, quite a lot of businesses were forced to sell off their houses, deeply reducing prices by 40 percent-50 percent. Moreover, they simultaneously applied to convert a commercial housing project into a social housing project with a small area with a selling price of less than VND15 million per square meter.

Thanks to their proactiveness in reducing house prices and restructuring apartment products, businesses have overcome difficulties. More importantly, as house prices return to normal, many low- and middle-income people can buy the house of their dreams; it helps to break the frozen real estate market and boost the economy.

Therefore, on the one hand, the state agency should remove the law for real estate projects, but at the same time, it needs to let the market self-regulate, the government should not intervene by administrative orders. The ultimate goal is to pull house prices down deeply, back to their real values so that home prices will be affordable again. It is also an opportunity to restore the economy, reduce the pressure of compensation for site clearance for infrastructure development, reduce land rental prices for production and business enterprises, and reduce input costs for social housing projects.

In particular, state management agencies need to develop legal policies on progressive taxation of ownership of many houses and land to contribute to the elimination of speculation for stable development of the real estate market.

Other news