Low birth rate and liquidity bottleneck

The Vietnam Association of Realtors (VARS) recently published a controversial report on "Declining birth rate and long-term impact on the housing market" stating that Vietnam is entering a period where demographic factors begin to affect real estate demand. However, many also believe that in the short term, "hard" factors such as house prices, supply and borrowing costs are more important causes.

According to VARS data, Vietnam's fertility rate has fallen from 3.8 children per woman in 1989 to just 1.91 children in 2024. In large cities such as Hanoi and Ho Chi Minh City, the rate is approaching the "severely low fertility" threshold of less than 1.3 children per woman. This means that the number of new households, which is the main driver of the housing market, will gradually decrease in the coming years, especially in the large-area apartment segment that is intended for large families.

VARS predicts that if this situation persists, Vietnam may face the risk of real estate supply and demand imbalance similar to South Korea or Japan, countries that are being strongly affected by aging populations and extremely low birth rates.

Dr. Pham Viet Thuan, Director of the Institute of Natural Resources and Environment, agreed with the forecast, saying: "In the long term, real estate liquidity is affected by many policies: laws, input costs, economic crisis and population. If the population does not increase, especially the low birth rate, housing demand will gradually decrease, leading to a decline in liquidity."

From another perspective, Ms. Vo Nhat Lieu, CEO of Propiin Real Estate Finance Technology Academy, emphasized: "Low birth rate is not only a population issue, but also a key factor that changes the structure of the real estate market. We often only look at interest rates, credit or legality, but demographic factors are the longest-term and most profound variables."

However, data from the General Statistics Office shows that the number of new households in Hanoi and Ho Chi Minh City is still increasing by 2%-3% per year. This shows that the demand for housing has not disappeared, but is being "restrained" by economic factors. According to Ms. Pham Thi Mien, Deputy Director of the Vietnam Real Estate Research Institute (VARS IRE), the main reason for the decline in liquidity is not due to a lack of new households, but because housing prices are beyond affordability. She cited an average price of VND75-80 million/m2 in Hanoi and VND85-89 million/m2 in Ho Chi Minh City, an apartment costing VND2-3 billion is far beyond the reach of the middle-income group.

Not only the selling price, the interest rate on home loans is also a big barrier. Currently, the average interest rate fluctuates between 8% and 12% per year, some banks offer incentives of 6% and 7% in the first few years, but this is still much higher than in Japan (1% and 2%) or Singapore (2% and 4%). With a loan of 1.5 billion VND for 30 years and an interest rate of 10%, the buyer must pay 15-20 million VND per month, beyond the ability of many young families.

In addition, the fact that many people do not want to get married early also leads to different housing needs. "They need multi-purpose space, both for living and working, and are no longer interested in 60-70 m² apartments with fixed designs," said Ms. Lieu.

According to experts, to unblock the market, Vietnam needs to simultaneously address two issues. In the short term, it is necessary to increase the supply of affordable housing, reduce interest rates, and improve credit procedures. In the long term, it is necessary to prepare for the scenario of an aging population, low birth rate, and changing housing needs. "If we only look at demographics and ignore policies and products, we will misdiagnose the disease. We need affordable housing and a cheaper loan mechanism," said Mr. Tran Khanh Quang, Director of Viet An Hoa Real Estate Company.

Source: https://nld.com.vn/ti-suat-sinh-thap-va-nut-that-thanh-khoan-196250825201816875.htm