Nevertheless, individuals with a genuine housing demand and an average income continue to face difficulties in acquiring a residence, primarily because of the exorbitant prices of apartments.
Apartments offered at high prices
In Binh Duong Province, Phu Dong Real Estate Joint Stock Company (Phu Dong Group) recently held a groundbreaking ceremony and unveiled the Phu Dong SkyOne apartment project. Positioned along Provincial Road 743C in Di An City, the project covers 5,615 square meters with a total investment of VND1.1 trillion. It comprises two towers, each standing 30 floors tall, and one basement level, offering a total of 780 apartments.
After two years of hiatus due to financial constraints and legal obstacles, Danh Khoi Group has resumed work on the Astral City development in Thuan An City, Binh Duong Province. This project, covering an area of 3.73 hectares, consists of a multi-story residential and commercial complex comprising eight towers, each towering 40 stories high, and housing nearly 5,000 apartments. The total investment for this endeavor is valued at VND8.28 trillion.
Khang Dien Investment and Trading House Limited in HCMC has received the green light from the Department of Construction to sell more than 1,000 upcoming apartments in The Privia project located in Binh Tan District. Furthermore, Gamuda Land recently marked the commencement of the Eaton Park project in mid-December. Situated in An Phu Ward, Thu Duc City, this development was acquired by Gamuda Land from Tam Luc Company and aims to create a sizable community of approximately 2,000 apartments.
Despite the initiation or resumption of many apartment projects towards the end of the year, it is evident that the selling prices remain steep, surpassing the financial means of most laborers. For instance, the Phu Dong SkyOne apartment project has established a price range of VND32-35 million per square meter. Similarly, in the Astral City project, the market prices are projected to be around VND42-45 million per square meter by Danh Khoi Group.
Khang Dien recently started sales for The Privia project in November 2023, with prices hovering around VND50 million per square meter (excluding VAT). On the other hand, the Eaton Park project, invested by Gamuda Land, has not yet been officially announced, but real estate agencies indicate that the average selling price for apartments will fall within the range of US$6,000-US$7,000 per square meter (equivalent to VND146-170 million per square meter).
According to economic experts, at the current price levels, it is extremely challenging for individuals with low incomes, and even those with relatively average incomes, to access the housing market. For instance, consider the situation of Nguyen Thu Huyen and her husband, office employees residing in Linh Dong Ward, Thu Duc City, with two children, are actively researching projects in HCMC to purchase an apartment. However, with a total monthly income of nearly VND30 million combined with savings accumulated over the years, they have not been able to find a suitable apartment.
"Given the current circumstances, I assumed that apartment prices would be more reasonable; however, most apartments in residential projects are priced at VND40 million per square meter and above. It seems I'll have to put aside the dream of buying an apartment," shared Huyen.
Likewise, Tran Van Tu, originally from Thua Thien Hue, has been establishing himself in HCMC since 2015. Currently, the monthly income of his household is around VND25 million, and they have VND500 million in savings. With the desire for a stable residence, Tu and his wife have been exploring apartment projects in suburban districts such as Binh Tan, 12, and Binh Chanh. However, the selling prices for apartments consistently range from VND40 million to VND60 million per square meter.
"After an extensive search, we ultimately made the decision to buy a 2-bedroom apartment in Di An City, Binh Duong Province, bordering HCMC, at a rate of VND35 million per square meter. Although the price is not easy to bear, and the location is far from our workplace, my wife and I are striving to secure a place to live and gradually repay the debt," stated Tu.
Cost reduction for price reduction
According to the analysis of several real estate experts, the primary cost components of commercial housing projects include land acquisition costs, construction costs, financial expenses, and management expenses.
Of which, land costs constitute approximately 15 percent of the total cost for condominium projects, around 30 percent for townhouse projects, and about 20 percent for villa projects. Meanwhile, construction costs represent about 50 percent of the total cost for condominium projects, roughly 30 percent for townhouse projects, and approximately 20 percent for villa projects.
Currently, construction costs are on the rise due to increases in material and labor expenses. For instance, the cost of constructing a floor in condominiums has surged to VND12-13 million per square meter, compared to the previous range of VND7-8 million per square meter. Financial costs, encompassing credit interest and repayment of other capital sources, usually constitute approximately 10 percent of the total cost, while management costs account for around 5 percent of the total cost.
"All the mentioned costs are calculated under normal market conditions for commercial housing projects completed smoothly within a 3-year timeframe. If there are delays due to legal complications, as has been the case in recent years, the total investment costs surge significantly. Moreover, there are other 'unspecified costs.' However, regardless of the nature of these costs, all expenses are factored into the selling price that customers must bear," analyzed a real estate expert.
To cut costs, considering the outlined cost structure, numerous experts and real estate businesses argue that the fundamental issue is the need for administrative procedure reform in investment. Efficient procedures will decrease loan interest costs, management fees, and many other unidentified expenses. While some remaining costs can be lowered, the impact may not be substantial, as most are considered 'fixed' expenses like construction and land transfer fees.
According to Mr. Pham Duc Toan, CEO of EZ Property Investment and Development Joint Stock Company (EZ Property), to reduce home prices, the Government needs to establish a housing investment fund, specifically focusing on social housing and homes for low-income individuals. By introducing a significant supply of affordable housing to the market, it is expected that housing prices will be more effectively controlled than they currently are.
The HCMC Real Estate Association (HOREA) has recently recommended a modification in the method of collecting fees for land use in commercial housing projects. They propose a shift to a tax levied on the 'act of converting land use from agricultural or non-agricultural land to residential land,' with a suggested tax rate ranging from 15 percent to 20 percent of the listed land price to contribute to the reduction of prices in the commercial housing sector.
The HOREA proposes streamlining the administrative procedures to gradually reduce unspecified costs during the implementation of commercial housing construction projects, thereby contributing to lowering housing prices.
Mr. VO HONG THANG, Director of Consulting Services and Project Development at DKRA Group: Considering reducing anticipated profits
Real estate corporations and businesses should temper profit expectations, refrain from setting exorbitant prices, and consider offering increased discounts, along with promotional and after-sales incentives, to invigorate consumer demand within the real estate market, fostering market confidence and ensuring a robust cash flow, thus enhancing liquidity for businesses.
Moreover, these entities should strategically invest in developing affordable commercial housing projects. Recognizing the substantial and liquid market demand for reasonably priced commercial housing, this initiative can help mitigate risks while addressing the overarching goal of reducing housing prices across the market.
Ms. TRANG BUI, CEO of Cushman & Wakefield Real Estate Services Company: Concentrating on affordable housing segment
The affordable housing segment (Class C) – commercial housing priced between VND2 billion and VND3 billion per unit in HCMC – is a practical solution for the settlement and establishment of young individuals residing and working in this bustling urban area. Consequently, it is crucial to bolster supportive policies encouraging businesses to direct more attention towards the affordable housing segment.
To alleviate challenges in the real estate market, the Prime Minister has directed the Ministry of Construction to provide guidance to real estate enterprises on restructuring market segments and reducing product costs.
This directive was one of the directives in the announcement of the Prime Minister's conclusions during a conference addressing solutions to overcome challenges in credit growth for business and production activities, promote economic growth, and ensure macroeconomic stability, recently issued by the Government Office.
In this context, the Prime Minister has instructed the Ministry of Construction to guide localities in closely monitoring project situations, progress in implementation and capital disbursement, and challenges to promptly find solutions to overcome difficulties related to planning, bidding, auctions, and land allocation.
Additionally, the Ministry directs to expedite the resolution of administrative procedures related to real estate projects, strengthen inspections and examinations to provide timely guidance and address cases causing difficulties and complaints in administrative procedure resolution for citizens and businesses.
The Prime Minister has urged the Ministry of Construction to propose suitable, timely, and effective solutions for restructuring housing market segments catering to those with genuine needs, social housing, worker housing, and low-income individuals.
