Ministry mulls national housing fund to assist low-income earners

Two men play chess near apartment buildings in Ho Chi Minh City’s District 7. It takes between 24.5 and 26.6 years for a Vietnamese to be able to buy a house.

Live a very strict, austere life. Save everything you can after working very, very hard. Do this for 25 years, and maybe, just maybe you will be able to buy your first home.

This is the reality for millions of people in the country.

For people whose monthly income is just several million dong, the largest sum they can put aside is roughly VND1 million per month, said Deputy Construction Minister Nguyen Tran Nam said. This kind of savings does not mean anything considering that the cheapest apartment in Hanoi and other large cities costs VND400 million (US$20,500).

“Nobody can buy a home in large cities if they only rely on salary income,” Nam said.

Vietnam ranks 100th in the world in terms of wealth, but 20th in terms of house prices, he added, highlighting a disparity that makes a dream home, just that, a dream, for many citizens.

Nguyen Manh Ha, director of the Construction Ministry’s Housing and Real Estate Market Management Department, said Vietnam has a house price to household income ratio of 24.5-26.6.

“This means it takes between 24.5 and 26.6 years for a Vietnamese to be able to buy a house providing they save all of their money for this,” Ha said. The ratio is too high compared to the world average of 3-4 years.

Vietnam ended its housing allocation system two decades ago, when it stopped granting apartments and small houses to state employees and workers and started making housing allowance a part of their salary package. The problem is that this portion is too small to be of any real use.

In 1993, for instance, the allowance was equal to 7.5 percent of the minimum monthly wage, or VND9,000. As the minimum wage has been raised to VND730,000 a month, the housing budget has also expanded, but to a mere VND54,750 per month ($2.80).

Nguyen Thanh Hai has been putting aside more than that. Hai and his wife, both working for government agencies in Hanoi, earn around VND8 million a month together. Out of this income they save VND2 million every month for a house.

But the rate at which their savings increases cannot keep pace with the increase in real estate prices. “The chance to own a home is now out of my reach,” Hai said. “Two years ago, we were only VND600 million short of a house, but now we need another VND1 billion.”

Thinking about what the future may hold for him, Hai said there is one thing he can be sure of – that he and his wife will have to keep living in a rented house.

Opaque market

Total housing area in Vietnam has expanded steadily, by around 86.8 million square meters last year, and many projects to develop housing for low-income urban residents have been launched. However, the Ministry of Construction has conceded that providing housing for low income citizens is a stiff challenge.

The trend of consistently soaring house prices has not eased in years, and Dang Hung Vo, former deputy minister of Natural Resources and Environment, said it was because the market was driven by speculators.

“The market is not transparent,” he said. “There is a group of people standing between developers and people with real housing demand and this group earns a lot of money from inflated house prices.”

When prices spiral out of control and far from the real value, the housing pressure grows exponentially, he said, stressing the need for more transparency in the real estate market.

In a bid to ease the problem, the Construction Ministry is mapping a 10-year plan that envisions, among other things, the launch of a national housing fund to which all employees in the country will contribute.

Contributors to the fund for 10- 15 years will be eligible to make purchases from social housing projects. If they choose not to, they will receive their money, with interest, at their retirement, just like a usual pension fund.

Deputy Construction Minister Nguyen Tran Nam said there are around nine million employees on official payroll records and a 1 percent contribution from them every month would amount to a fund large enough to finance more housing projects in the country.