Ho Chi Minh City is the destination of a large number of young people belonging to the group of skilled workers from many provinces and cities across the country. Of the 10 million people in Ho Chi Minh City, 55% are young; 30% of people in this group have the need to buy a house.
Ms. Giang Huynh, Deputy Director of Market Research and S22M Department of Savills Vietnam
Affordable supply is getting scarcer
According to Ms. Giang Huynh, Deputy Director of Market Research and S22M of Savills Vietnam, the age group from 25 to 35 is considered to have good income to buy a house. For this age group, owning a house requires a certain income and balance to be able to make a down payment. In Ho Chi Minh City, this group of customers often targets small apartments with an area of 50-70m2 in suburban areas.
“If you do not receive financial support from your family, the minimum income needed to buy a house is from 30-45 million VND per month. This is considered the level that can accumulate a down payment and pay additional bank interest,” the expert commented.
Although this is a potential market, the supply of this segment is currently not much. The market share of apartments from 2-3 billion VND in Ho Chi Minh City is very small, accounting for less than 20% of the current supply market share and mainly concentrated in suburban areas. This leads to limited choices for buyers. The price is also high, not at a level that is easy to consider.
Ms. Giang Huynh assessed that the imbalance between supply and demand makes it difficult to buy a housing product that is suitable in terms of location, area and price.
“With the current situation, young people will have difficulty finding suitable housing options. At the same time, the cost of living in Ho Chi Minh City is increasing while incomes are not increasing. This makes it more difficult to save up income to be able to pay high prices,” added the Deputy Director of Savills.
New supply decline
Looking at the broader picture, Ms. Giang Huynh believes that the main cause is the imbalance between supply and demand, along with the rising cost of living compared to income. To solve this problem, there needs to be intervention from real estate developers, the Government and other stakeholders in increasing the supply of affordable housing, while also addressing the issue of location and area.
According to Ms. Giang Huynh, the biggest bottleneck in the current housing market is the lack of approval procedures, leading to legal bottlenecks, preventing investors from implementing new projects.
“As a result, the number of products on the market is very small, and the remaining products do not meet the current demand segment. Current products on the market, including investment and rental, are mostly in the mid- to high-end segment, with demand not being met by the majority. Current legal issues affect reasonable supply, and without supply, the demand problem cannot be solved,” Ms. Giang pointed out.
In addition, the market is currently sluggish and lacks liquidity. Normally, if people have a reserve, they will have the option to invest in real estate, stocks or another investment channel. However, in the current global economic context, most channels are facing difficulties and liquidity limitations.
“The sales and absorption situation in the general market is very low. Therefore, home buyers are waiting for liquidity to recover so that everything can operate again,” Ms. Giang commented.
According to Savills HCMC Market Research & S22M Department, sales are still taking place in the C-class housing segment targeting middle-income earners and young people, but are uneven. High absorption rates mainly occur in projects with affordable prices and located far from the city center. This shows that demand in this segment is still strong and potential. The majority of customers buying in these projects are first-time home buyers.
Ms. Giang believes that the most important thing right now is to bring the market back to a state of balance between supply and demand. Data from Savills shows that this can only happen from 2024 onwards, when some projects in the affordable housing segment start operating again. The biggest bottleneck in the market right now is the project's legal issues. Once that bottleneck is resolved, the real estate market will gradually recover and return to operation.
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