How to address high housing prices?

Home prices in Vietnam have been steadily rising over recent years, far outpacing the average income of most people. This is especially evident in major urban areas like Hanoi, Ho Chi Minh City, and Da Nang. While prices climb, income growth has been slow, making home ownership an increasingly difficult equation for the majority of citizens. This growing disparity between prices and earnings is, however, more than just a personal financial challenge and already has broader implications.

According to real estate experts, the root of the issue lies in a mix of interconnected factors. Many have been urging regulatory agencies, particularly the Ministry of Construction (MoC), to take a more proactive and determined approach. This includes introducing stronger policies to stabilize housing prices and address ongoing market inefficiencies. Only with such efforts can Vietnam’s real estate market move towards a semblance of balanced growth.

Impact from soaring prices

Dr. Le Xuan Nghia, former Vice Chairman of the National Financial Supervisory Commission, recently addressed a seminar on social housing, where he highlighted a troubling reality: while cities are being marketed as modern and vibrant, the promise of livability remains beyond many. Soaring real estate prices have left low-income earners feeling locked out of the market, with the root cause largely traced back to a critical lack of housing supply.

Despite all this, Dr. Nghia also pointed out several positive developments. In recent months, the supply of real estate, both in the social and commercial segments, has indeed begun to improve. The legal framework has become more stable, and transport infrastructure is being steadily upgraded. These are encouraging signs that could help reactivate the real estate market.

Mr. Nguyen Chi Thanh, Vice Chairman of the Vietnam Association of Realtors (VARS), offered a deeper analysis of why prices remain high. He noted that property prices in Ho Chi Minh City have consistently been higher than in Hanoi, mainly due to the limited number of newly-approved projects. This restricted supply has triggered a chain reaction, pushing up prices in Hanoi as well. Furthermore, as large developers dominate the market, competition is rather limited, causing prices to rise in a landscape where buyers have few alternatives.

He also raised concerns about existing regulations that put small and medium-sized developers at a disadvantage. These businesses must handle site clearance on their own - a costly and time-consuming endeavor that weakens their ability to compete and complete projects. Combined with lingering issues surrounding urban planning and project approval processes, smaller players face steep barriers to entry in a market that increasingly favors the big players.

Taking a broader view, economist Mr. Trinh Ha, currently based in Malaysia, underscored the serious consequences of unaffordable housing, warning that rapidly-rising home prices, left unchecked, are becoming a national concern. Not only do they directly impact low and middle-income households, they also create ripple effects across the economy.

Studies show that the average home in Vietnam now costs about 30-times the average annual income. In other words, a household would have to save every VND for 30 years, without spending anything on food, education, or healthcare, just to afford a home. “To buy a home, many families are forced to borrow heavily or liquidate their long-term savings,” he explained. “Yet daily living costs remain unavoidable - housing, food, education, medical care. As a result, people are cutting back on personal spending, travel, and leisure. In the long run, this weakens consumer demand and could undermine the overall health of the retail and service sectors.”

Mr. Ha also emphasized that limited access to housing can have profound social consequences. Without secure living conditions, many young people delay marriage or choose not to have children. While Vietnam is still benefiting from its demographic dividend, this window is narrowing. Within the next 10 to 20 years, the country will face a rapidly aging population, and if birth rates continue to decline, Vietnam could be at risk of falling into the middle-income trap - “getting old before getting rich”.

Its economy has long thrived on a young, low-cost workforce; a major factor in attracting global manufacturing shifts. However, most of these operations are labor-intensive, and when that labor advantage fades, supply chains can easily pivot to other emerging markets. The real estate sector, like many others, will not be immune from such a transition.

From policy to practice

Mr. Ha suggested that Vietnam could look to countries like Malaysia, Singapore, and South Korea for inspiration in tackling its housing affordability crisis. In Malaysia, for instance, people find it easier to access housing thanks to government-led efforts to keep property prices within reach for the majority of citizens.

One key factor is planning. Malaysia enforces urban planning with a high level of discipline and transparency. Another strength lies in decentralization. Beyond national-level planning, Malaysia gives real authority to state governments, creating flexibility and allowing each region to respond to its own realities.

Notably, Malaysia also applies a Transit-Oriented Development (TOD) model in urban areas. Homes, schools, and public services are designed to grow along transport infrastructure like major roads and metro lines. This spreads population density more evenly across metropolitan areas, relieving pressure on city centers.

Second, Malaysia has introduced housing support policies tailored to different income groups. There are specific programs for low and middle-income residents, and special subsidies for ethnic Malays. And third, Malaysia actively discourages property speculation through various policy tools, helping to stabilize the market.

In Vietnam, Dr. Nghia pointed out, real estate does not follow typical supply-demand behavior. When prices rise, many sellers hold onto their assets in hopes of even higher returns, while buyers pull back - creating a prolonged stalemate. “If the government doesn’t act quickly to increase supply, the housing bubble that began forming in 2023 could continue to expand unchecked,” he warned. “Eventually, it could burst. When that happens, no one buys, no one sells, and the whole market freezes. Worse still, the shock could ripple through the banking sector.”

Mr. Thanh added that Vietnam’s real estate sector is not just entering a new phase, it is being called upon to lead one. The country’s so-called “new era” is not a slogan, but a measurable goal and a national aspiration. It demands breakthrough thinking and strategic shifts from market players.

From a policy perspective, experts agree that regulators, especially the MoC, must stay actively involved and push for bold, timely reforms. Stabilizing housing prices and fixing systemic bottlenecks will be critical to creating a healthier, more diverse, and more responsive property market. “Vietnam’s real estate market is shifting quickly,” Mr. Thanh said. “Developers who cling to outdated models will be left behind. Those who adapt, innovate, and embrace change will gain the upper hand in this new game.”