Solutions to reduce housing prices, meeting the needs of low-income people

Affordable housing supply has been absent from the market for the past two years.

According to a survey by real estate market research companies over the past year, although housing prices in Ho Chi Minh City have decreased, most people with real housing needs still find it difficult to access affordable housing priced from 25 to 30 million VND/m2.

Real estate - Solution to reduce housing prices, meeting the needs of low-income people — The affordable housing segment has very little supply and has been absent from the Ho Chi Minh City market for the past two years.

Currently, a mid-range apartment (2 rooms) costs about 2.5 billion VND (35 million VND/m2), about 20 times higher than the average income of households and individuals who can save about 100 million VND/year.

Affordable apartments priced at around VND2 billion or less (VND25-30 million/m2) and social housing apartments are in very limited supply, so they have been almost absent from the Ho Chi Minh City market in the past two years.

Mr. Le Bao Long, Strategy Director of Batdongsan.com.vn, said that real estate prices have been constantly increasing and are increasingly outstripping people's income. In particular, the apartment price increase index in Ho Chi Minh City has exceeded the growth rate of people's income after 8 years, from 2015 to now, increasing by 82%.

Meanwhile, data from the General Statistics Office shows that the income of people in urban areas increased by only 39%. Thus, the price of houses in Ho Chi Minh City is almost equal to 24 years of people's income.

Explaining the current high housing prices, Mr. Le Huu Nghia, Director of Le Thanh Company, said that the State has paid attention to this situation and sought ways to reduce it, but even in the most difficult period of the real estate industry, this goal is still full of challenges and has not achieved the expected results.

According to Mr. Nghia, there are 3 reasons for high housing prices including: high input costs such as land, materials, labor, design, supervision, and construction; variable input costs such as lengthy procedures and legal procedures, high interest rates; and the will of the primary seller - the investor and the secondary seller - the investor in optimizing profits.

Join hands to reduce housing prices

Many experts believe that in order to reduce real estate prices and restructure the segment, there needs to be "joint efforts", unification of viewpoints, implementation methods, and coordination of many subjects and components, from state management agencies to real estate enterprises and banks.

Real estate - Solution to reduce housing prices, meeting the needs of low-income people (Figure 2). — *It is necessary to restructure the cost and price calculation of housing projects to meet the housing needs of low-income people.*

On the part of the State management agency, first of all, it is necessary to study options to shorten the process and administrative procedures for investment and construction; consider options to support businesses in calculating land use fees and site clearance, because these are two items that account for a lot of costs for investors, directly affecting the price of real estate.

According to Mr. Le Bao Long, Strategy Director of Batdongsan.com.vn, real estate prices are also increasing because of the sharp increase in related costs, from land fund creation costs, construction material prices, to investment, construction, labor costs, etc. In addition, low interest rates and high inflation are also factors contributing to the continuous increase in real estate prices in recent times.

In order to reduce housing prices, Mr. Nguyen Van Dinh, Vice President of the Vietnam Real Estate Association, President of the Vietnam Real Estate Brokers Association, said that it is necessary to restructure the segments and to do so, there needs to be cooperation, contribution, unification of viewpoints, implementation methods, and coordination from many sides, from state management agencies to businesses, banks, etc.

Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA) proposed restructuring the cost and calculation of selling prices of housing projects.

The main cost of housing projects includes land fund establishment fees, construction costs, financial costs, and management costs.

Regarding the cost of creating land funds, according to Mr. Chau, it is necessary to change the way of collecting land use fees, converting them into a tax levied on "the act of converting land use purposes from agricultural land, non-agricultural land to residential land", with a transparent tax rate (which can be about 15-20% of the land price in the land price list).

This will eliminate the "ask-give" and harassment mechanism; and reduce the land use fee payment compared to the current method, which will contribute to reducing housing costs, thereby creating conditions to reduce housing prices.

"There is no need to worry too much if investors still sell houses at too high a price, because they will have to pay more corporate income tax and in principle, prices are determined by the market. If they sell houses at too high a price, home buyers may turn their backs and boycott them," said Mr. Chau.

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