Rising land and construction costs are putting the squeeze on affordable housing in HCMC with the average apartment price currently sitting at VND 5.5 to 6 billion US$216,877, about 30 times the average annual household income. This does not look likely to ease anytime soon either with a report from real estate firm Savills finding that in the first half of 2024, apartments under VND 3 billion or US$118,300 made up just 18 percent of the primary housing supply.
Notably, from 2018 to the third quarter of 2023, the land price for sale in the South and the North increased by 71 percent and 54 percent, respectively. On average, in urban areas, land costs account for about 10 percent of the cost of apartments and 20 to 30 percent of the cost of townhouses.
Construction materials have also experienced sharp increases, further impacting overall costs. As of March 2024, prices of construction materials have increased about 21 percent compared to January 2019, with materials accounting for about 70 percent of costs of construction projects in Vietnam.
Furthermore, many real estate projects have had to put projects on hold with the Vietnamese construction industry as a whole is facing headwinds–notably, developers are struggling against tighter credit conditions and a slowdown in the real estate market more broadly–and this is stymying supply.
Of note, the aforementioned Savills Vietnam report, suggests that by 2026, HCMC will likely have no low-rise products valued under VND 5 billion–about US$200,000–and only about 10 percent of the primary supply will cost less than VND 10 billion or US$394,321.
See also: Vietnam’s Real Estate Market Recovery 2024: Unpacked