Housing Projects in Vietnam remain out of reach

by Nguyen Ngoc and Hoang Thu
August 31, 2011

http://www.weeklyblitz.net/1739/housing-projects-in-vietnam-remain-out-of-reach

Millions of low-income earners and hundreds of thousands of civil servants wishing to own their own house had high hopes when a number of social housing projects were launched, but access remains out of reach for most.

Owning a house is a legitimate aspiration of all people, and perhaps even more so for the poor. It represents stability for families and in a market economy is a valuable asset. While it's not at all difficult for the wealthy to own property, the dreams of the poor can all too easily be dashed.

According to a report from the Ministry of Construction, there will be about 37 housing projects for low-income earners built in 2011, providing shelter for some 64,000 people. In Hanoi, low-cost housing projects are underway building about 25,000 apartments for low-income earners. Notable projects including the CT1 Ngo Thi Nham condominium project in Ha Dong district and others in Gia Lam and Tu Liem districts.

Meanwhile, 8,300 low-cost housing units, equivalent to more than 1.2 million sq m, should address housing problems in Ho Chi Minh City. Da Nang has also constructed 127 apartment blocks, expected to have 11,332 apartments, of which 66 blocks containing 2,859 apartments have come into use, and 61 blocks with 8,473 apartments are under construction or have completed the paperwork to begin construction. In the 2011 - 2015 period, authorities also plan to invest similar amounts of capital.

One estimate in the report shows that there are about 5.86 million low-income earners in urban areas in need of accommodation, and this number will increase to 6.48 million by 2020. Therefore, only 1 per cent of accommodation needs will be met for low-income earners in urban areas each year.

One reason for social housing not meeting the needs of all low-income earners is the limited supply against huge demand. According to preliminary figures, Ho Chi Minh City now needs some 70,000 apartments to meet the needs of public servants, armed forces personnel, and teachers, etc., who work in the city.

Requirements in Hanoi are even higher. In early May, low-income earners who registered to buy an apartment in the Kien Hung social housing project had to take part in a "lucky draw" to gain the rights to purchase an apartment. There were 1,700 people expressing interest but only 560 apartments, meaning that only one in three were successful.

Winners of the lucky draw were, of course, very happy to have the opportunity to buy their own home. For many, though, this was quickly replaced by disappointment when they realised that prices were still beyond their means. Figures show that after the CT1 Ngo Thi Nham project sold low-cost apartments for VND8.8 million ($440) per sq m, other social housing projects in Hanoi were asking for VND10 million ($500) - VND12 million ($600) per sq m.

While such prices stack up well against commercial housing projects, they are still too high for low-income earners and public servants. Mr Nguyen, who won one of the lucky draws, is now very concerned about how he can get the money to buy the apartment. "My wife and I have saved some money but the VND1 billion ($50,000) price tag for the apartment is beyond our capacity," he said.

Vietnam's real estate market is beset by difficulties. Housing prices remain too high and speculation is rife in the market in general and in the low-income housing market in particular. Such factors create difficulties in the management of low-income housing. One apartment in the CT1 Ngo Thi Nham project was advertised for sale online in May, which was priced at about VND8.8 million ($419) per sq m when the contract was signed in late 2010.

But the price now being asked is VND20 million to VND23 million ($952 - $1,150) per sq m. The Department of Civil Engineering has recently been co-operating with Hanoi Police in conducting investigations of low-income apartment purchases, and four cases of people illegally purchasing low-income apartments have been uncovered, Mr Nguyen Quoc Tuan, Deputy Director of Hanoi Department of Construction announced on June 17. "Whenever we have information we make it public", Mr Tuan said.

Decision No 34 from the Hanoi People's Committee only permits the transfer of low-income housing after ten years. Profiteering from State policies is dealt with strictly and criminal prosecutions are always a possibility.

Dr Pham Si Liem, Deputy President of the Vietnam Federation of Civil Engineering Association and former Deputy Minister of Construction, admitted that many of those who buy apartments are not low-income earners. "Put simply, low-income earners could never afford these apartments," he said. "Those who can afford to pay VND6 million ($285) per sq m cannot be described as 'low-income earners'." Without assistance from the State, such apartments will always be beyond the reach of low-income earners. Dr Liem added that the price of basic low-income housing in Hanoi is set at around VND5 million ($238) per sq m.

Investors, meanwhile, have legitimate concerns when they determine the price of social apartments: prices for input materials such as cement and steel are increasing and site clearance is a costly exercise. As a business, they target to make a profit, and so must sell the apartments at higher prices. But low-income earners have been squeezed out.

According to Dr Liem, the government's social housing policy must assist low-income earners that desire to own a house but do not have the financial capacity to do so. The existing social housing policy of the government is not the direction to take, he believes. "The method of asking builders to create the necessary conditions for buyers is not right," he said. "With the goal of doing business to make a profit, investors will always want rapid capital turnover. So they only sell houses to those who have the financial capacity."

Two things need to happen for housing to become more affordable: prices must come down and salaries must go up. It also necessary to establish housing development funds that support low-income earners with loans at preferential interest rates. Low-income earners look towards preferential loans and better salaries to make their home ownership dreams come true.

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