Homebuyers consider moving away to own a home

In the context of continuously increasing house prices, buyers can consider and choose to rent, or accept moving to neighboring provinces to buy at a more reasonable price.

High selling price

Savills data recently released shows that in both big cities like Hanoi and Ho Chi Minh City, the natural annual demand for housing is about 50,000 houses. This is the result of immigration, moving out of the home of adults and the average number of people in a house decreasing…

This demand figure has not been met by supply constraints for some time, causing pent-up demand for housing. In addition, macroeconomic factors such as the volatile gold market and low interest rates have caused investors to seek reasonable and long-term investment channels. The demand for real estate in the apartment segment has also increased.

The demand for real estate in the apartment segment is increasing. Photo: Viet Dung

However, Savills' report in the first quarter of 2024 showed that the primary price of apartments in Hanoi reached VND59 million/m2, up 3% quarter-on-quarter and 14% year-on-year. The secondary market also recorded an increase in transaction volume and prices also increased compared to previous prices.

In Ho Chi Minh City, data from CBRE Vietnam shows that at the end of the first quarter of 2024, the primary price of apartments in Ho Chi Minh City reached VND61 million/m2, unchanged from the previous quarter. Investors continue to maintain attractive sales and payment policies to increase product liquidity. However, liquidity is not very positive.

It is undeniable that the imbalance between supply and demand has pushed up housing prices. However, from the seller’s perspective, investors also have their own “sufferings” that make it difficult to reduce prices, even if they really want to.

The leader of a real estate company in Ho Chi Minh City said that to complete a residential real estate project, the company must “bear” a lot of costs. For example, the land costs of the project include compensation costs, site clearance costs through receiving the transfer of land use rights, land use fees, land rent, and rice land protection fees (if rice land is used) for the State.

Land-related costs usually account for about 15% of the cost of an apartment project, about 30% for a townhouse project, and about 20% for a villa project.

In particular, the current compensation and site clearance costs are usually deducted by the competent state agency at around 70% of the actual costs that the enterprise has incurred. The remaining actual costs that have not been deducted are considered profits and the enterprise must pay an additional 20% corporate income tax on that profit. Finally, these costs are all included in the selling price that customers have to pay when buying a house.

Construction costs account for about 50% of the cost of apartment projects, about 30% for townhouse projects and about 20% for villa projects. This type of cost is on the rise, for example, the cost of 1 m2 of floor space for apartment construction has now increased to 13-15 million VND/m2, nearly double the previous level of 7-8 million VND/m2...

“All of the above costs are calculated under normal market conditions, with a project completion time of about 3 years for a commercial housing project. If it takes longer due to legal problems like in the past, the total investment cost will increase significantly,” the leader of the above business shared.

The suburbs are bright spots

Faced with escalating prices, some projects have been priced beyond their actual value. Experts advise buyers to carefully consider the value of use and the reasonableness of the project.

“In general, if prices continue to increase, buyers will consider their financial situation. While real housing demand still accounts for the majority, if prices continue to rise, buyers can consider and choose to rent apartments in the inner city, or accept shifting demand to supply in neighboring provinces with more reasonable prices,” said Ms. Do Thu Hang, Senior Director, Consulting and Research Department, Savills Hanoi.

Ms. Do Thi Thu Giang, Director of Savills Vietnam Consulting Services, said that the process of owning a house and accumulating capital often starts with small, affordable apartments, then when the family accumulates assets, they move to larger apartments. Therefore, buying a house in a good location is often not feasible for first-time home buyers.

However, infrastructure remains the most important lever in changing the value structure of the housing market. Providing infrastructure reduces travel times and opens up more choices in the surrounding areas, solving the problem of affordability.

“The lack of affordable housing in big cities is undeniable. However, this is reasonable, because it is not a potential option for investors nor is it suitable for first-time homebuyers. Affordable housing is available in other satellite areas, and when infrastructure is improved, the distance from these areas to the city center will be shortened,” said Ms. Giang.

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