Ho Chi Minh City Faces Shortage Of Affordable Housing

• According to the latest market report from Savills, the Ho Chi Minh City apartment market is beginning to recover, with primary supply increasing and the successful transaction rate doubling from Q1, reaching 2,288 units.
• Affordable products, priced below VND 3 billion, accounted for only 18% of the new primary supply in the first half of the year.
• The market recorded just 10 new products in the townhouse/villa segment during the quarter. Over 77% of the total primary supply is priced above VND 30 billion per unit. Sales of these high-end products are struggling, with only a 6% absorption rate. 

Shortage of Affordable Housing

In the same report by Savills, the Research Department highlighted a 78% quarter-on-quarter (QoQ) and 199% year-on-year (YoY) increase in new apartment supply in Q2, reaching 1,125 units from one project and eight subsequent launches. Grade B units accounted for 70% of this new supply, bringing the total primary supply up by 13% QoQ to 5,574 units.

The primary supply for H1/2024 remained stable YoY at 6,690 units, with Grade B making up 56% of the market share, followed by Grade C at 40% and Grade A at 4%. The primary supply is mainly concentrated in the East (Thu Duc City) with 57% market share and the West (Binh Tan, Binh Chanh) with 29%.

Overall, the report assesses that the market is returning to a recovery trajectory, with transaction volumes increasing by 655% YoY, indicating market confidence. Q2 recorded 2,288 successful transactions, accounting for 70% of the total transactions in the first half of the year, thanks to reduced lending rates, clear product legality, and effective sales policies. In the first half of the year, the average primary apartment price reached VND 72 million per sqm of net floor area.

However, the report also points out that the supply of apartments under VND 3 billion is increasingly limited in Ho Chi Minh City, accounting for only 18% of the primary supply in the first half of 2024, mostly located more than 10km from the city centre. According to the research model by Savills, apartments under VND 3 billion are considered affordable. Analysts suggest that affordability will be a major challenge for the market as this segment is projected to account for less than 5% of the apartment supply in the next three years.

Giang Huynh , Director of Research and S22M at Savills Viet Nam, stated: “We have analysed to understand the context of affordable housing in Ho Chi Minh City. This model uses various income levels based on income, expenditure, and savings.”

The expert considers that homebuyers accumulate over 10 years, potentially supported by mortgages or their equity. Consequently, a two-bedroom apartment priced below VND 3 billion is considered affordable.

"Given the current situation, most affordable apartments in Ho Chi Minh City have been sold, with very limited active and future supply. Future affordable housing will mainly be introduced in Binh Duong, an adjacent area to Ho Chi Minh City. Therefore, it is clear that buyers in Ho Chi Minh City will have to move to this area to find affordable options"- Giang Huynh, Director of Research and S22M

Giang also noted that the secondary market has demonstrated positive trends recently, driven by limited handover supply and sparse primary products.

"In 2024, we expect significant secondary price increases for many Grade B and Grade C projects. Conversely, luxury projects, which set high prices in 2023, are experiencing some pressure in the secondary market. By location, districts with enhanced infrastructure connections and low handover supply are seeing the strongest secondary price increases," Giang said.

Landed Property Faces Multiple Challenges

“In a city of over 10 million people, we only have 668 primary landed properties, 10 new units, and 72 transactions in Q2. The market has declined similarly to the apartment segment in recent years due to numerous challenges. As a result, primary prices continue to rise amid limited supply. Although declining in 2024, the market inventory still consists mainly of high-priced products,” analysed the Director of Research and S22M at Savills regarding the townhouse/villa segment.

Specifically, data shows that over 77% of the total primary supply is priced above VND 30 billion per unit, with most of these high-end products located in urban areas, particularly in Thu Duc City.

High primary prices, competition from the secondary market, and affordable products in neighbouring provinces have created difficulties for the Ho Chi Minh City market. Products priced above VND 30 billion are struggling with only 6% absorption. Townhouses have the highest absorption rate at 31%, thanks to real demand and competitive pricing.

In Q2 2024, the sale of high-end shophouse products in The Global City led to a 2% QoQ and 4% YoY decrease in primary prices, reaching VND 320 million per sqm of land.

The report highlights that by 2026, Ho Chi Minh City will no longer have low-rise products priced below VND 5 billion, and only 10% of the primary supply priced below VND 10 billion. In contrast, products at this price level account for up to 85% of the supply in Binh Duong and 55% in Dong Nai.

In the second half of 2024, it is expected that 883 low-rise houses will be launched, primarily from subsequent phases of existing projects. Products priced above VND 20 billion will account for up to 80% of the future supply. Two new projects, Foresta and The Meadow, will provide 30% of the future supply of villa and townhouse offerings. Both projects have already received construction permits.

By 2026, future supply is expected to reach 4,663 units, primarily concentrated in District 2, Binh Chanh, and Nha Be. Due to limited land and infrastructure support, house prices in Ho Chi Minh City have tripled in the primary market and doubled in the secondary market over the past five years. Rising prices have driven real homebuyers to seek more suitable options in neighbouring provinces.

Overall, the Director of Research and S22M at Savills Viet Nam noted that major infrastructure projects are underway and will enhance the area, benefiting future supply along major infrastructure routes.

Download the Savills H1/2024 Market Brief for more insights.