Vietnam's housing prices are the cheapest in the world?

Affordable apartments in Manila, Bangkok, Hong Kong... are around 300,000 USD, while in Saigon they are only 30,000 - 40,000 USD, 7-8 times cheaper. Therefore, Vietnamese people are buying the cheapest houses in the world, said Chairman of Nam Long Company - Nguyen Xuan Quang.

On the sidelines of the 2015 annual shareholders' meeting of Nam Long Investment Corporation, Mr. Quang shared his personal views on this controversial topic. He analyzed that if we compare housing prices in Vietnam with the income of urban residents, it is true that it takes a long time to save up to buy. However, do not criticize Vietnam's real estate as expensive just because housing prices are higher than income. "If we calculate it fairly, Vietnam's housing prices are the cheapest in the world," he said.

This expert cited that, stepping outside Vietnam's borders, in cities with a scale similar to Ho Chi Minh City such as Bangkok, Hong Kong, Manila... to own an average-priced apartment like Nam Long is developing, you have to pay 300,000 USD per apartment. Meanwhile, in Ho Chi Minh City, the selling price of affordable apartments is only 30,000-40,000 USD, equivalent to 650,000-850,000 million VND per apartment, 7-8 times cheaper than other countries in the region.

Mr. Quang said that the profit margin of real estate businesses (especially low-cost housing units) in Vietnam is currently quite thin and risky. However, because people's income is still at a low level, if the price is higher than the market cannot absorb (consume). Low housing prices and profit margins of the real estate industry are a big challenge for the sustainable development of the Vietnamese real estate market.

Chairman of the Ho Chi Minh City Real Estate Association, Le Hoang Chau, also agreed with Mr. Quang's comparison. "It is true that affordable housing in Vietnam is much cheaper than in many other countries. Even in the high-end and luxury segments, the price difference between Vietnam and the region is very large," he said.

According to this expert, in the past 5-7 years, housing areas in urban areas have been shrinking in size and becoming smaller to lower the total value, pushing housing prices in Vietnam to a lower level compared to the general level of Southeast Asia, Asia and the world.

Although Vietnam's housing prices are among the lowest in the world, there are many conflicting opinions about the view that Vietnam's housing prices are the cheapest in the world. Photo: Vu Le

However, there are many opposing opinions on the view that Vietnam's housing prices are the cheapest in the world. General Director of Viet Do Real Estate Development Joint Stock Company, Mai Duc Hung, said that comparing housing prices is not just purely looking at the price factor. Because urban housing must be linked to the income level of workers in that locality.

The price of mid- to high-end houses in Singapore, Shanghai, and Malaysia is about 500,000-600,000 USD per unit, 3-4 times more expensive than in Vietnam. In the low-cost housing segment, Hong Kong, the Philippines, Thailand, and Malaysia... are estimated at about 300,000 USD, 7 times more expensive than in Vietnam. Correspondingly, the income of workers in these cities and countries is also many times higher than in Vietnam.

"We are not the country with the cheapest housing prices in the world because the income and affordability of the majority of people cannot afford to buy a house," said Mr. Hung. This expert explained that the average salary of Vietnamese workers is currently around 150-180 USD per month while many countries in the same region have reached 1,300-1,500 USD per month, or even higher. The difference in minimum wages is nearly 10 times.

According to the General Statistics Office (GSO), Vietnam's gross domestic product (GDP) in 2014 reached VND3,937,856 billion, equivalent to USD184 billion, calculated at the exchange rate of the State Bank of Vietnam on December 31, 2014, which was VND21,400 per USD. Based on the population of 90.73 million in 2014 (also according to data published by GSO), Vietnam's GDP per capita in 2014 reached USD2,028, equivalent to USD169 per month. This index is very modest in the region.

"If average wages and GDP are both low, and housing is still a valuable commodity beyond the reach of many people, then housing prices in Vietnam will still be expensive," Mr. Hung emphasized.

The housing affordability index of Vietnamese people is higher than many developed countries, despite the lower average income, which stems from the pressure of home ownership being ingrained in people's lives. The Savills survey highlights the complexity of the Vietnamese market, without mentioning whether housing is cheap or expensive.

Responding to the question of whether Vietnam's housing prices are among the cheapest in the world, Deputy Managing Director of Savills Vietnam, Troy Griffiths, said this is completely untrue.

Experts with many years of research on the Vietnamese and international markets assess that, compared to other countries in the region, housing prices in Vietnam are quite low. According to Savills research by the end of 2014, comparing real estate segments in the Asia Pacific region, Vietnam has lower selling or renting prices than many other countries. The paradox is that although the prices are lower, they are not easy to pay.

The key point here, Mr. Troy Griffiths analyzed, is what percentage of the population can afford to buy their first home. In fact, in Vietnam, even houses in the middle segment (cheap, affordable) are still out of reach for many people.

Furthermore, according to this person, it is very difficult to determine the affordability of Vietnamese people for housing real estate. Because this concept depends on many personal factors. Besides salary and income, there is also the impact from the family, at the same time, the popularity of the banking credit system in Vietnam is less than in other countries.

Previous studies by BOA, Merrill Lynch and Savills have shown large fluctuations, and even contradictions, in the housing affordability index of Vietnamese people. The affordability index is calculated by dividing the median house price by the median household income. Many developed economies have an index around 4 while Vietnam is between 9 and 13.

The paradox is that, although the average income is low, the ability to pay for housing of Vietnamese people is higher than some countries. The big difference is that Vietnamese people have a very high demand for home ownership, due to cultural influence. Meanwhile, citizens of other countries are not under pressure to buy a house, they can choose to rent a house in many forms.

"This shows the complexity of issues related to the Vietnamese housing market. However, it must be affirmed that housing prices in this market are among the lowest in the world, but not the cheapest," said Mr. Troy Griffiths.

According to VNE