VietNamNet Bridge
- Viet Nam
needs more than VND2.2 trillion (US$110 billion) in the next five years to
develop housing, according to a report recently released by Ministry of
Construction.

Ministry experts came up with the figure by assigning 21.5
square metres of floor space per capita.

The report analysed data from last year’s general
demographic census which projected that the country’s total population would be
more than 90 million in the next five years.

This increased population would need about 2 million square
metres of housing in the next five years.

Although Viet
Nam ranks eighth out of the 10 ASEAN
countries in terms of the percentage of the population living in urban areas,
its urban population has experienced an average annual growth rate of 3.4 per
cent.

Currently, around 14 per cent of city-dwellers rent while
the rate for the population as a whole is 6.5 per cent.

The report pointed out that makeshift housing is on the rise
in cities across the country and attributed this to an increasing number of
migrants from the countryside needed simple housing.

Housing for the low-income sector was a now a pressing issue
and needed more Government’s attention, the report noted.

Policy incentives are needed to encourage housing developers
to build low-cost rental apartments to meet housing demand and stabilise
housing and land prices, say analysts.

The Ministry of Construction reported last year that 11,458
families in the country were homeless. The figure for urban areas was 4,502.

The Government does have several policies in place to
address the problem, most of which focus on helping low-income earners find
places to live.

The policies also include a reduction in, or waiver of,
land-use fees as well as cheap bank loans for both property developers and
buyers. But these measures have been only moderately successful.

The rental market for low-cost apartments could be very
profitable, ministry analysts said, because most low-income families could not
afford to buy houses despite Government assistance.

According to ministry analysts, renting out low-cost housing
is even more profitable than renting out luxury apartments. A 50-square-meter
apartment costs around VND400 million (US$20,500) to build and fetches a rent
of VND3 million to VND5 million, meaning investors can recoup their money in 80
months. In comparison, if a luxury apartment costs VND3.5 billion ($175
million), the rent needs to be VND43.75 million to recoup the investment in the
same period.

Le Hoang Chau, chairman of the HCM City Real Estate
Association, said that while in the past most Vietnamese preferred owning
property to renting, times had changed.

Most people who rented were young and single or migrants,
the numbers of which had increased sharply in recent years, he said.

If there was housing for rent with reasonable facilities at
VND3 million to VND5 million, people would be willing to rent them for long
periods, he said.

While many firms were building houses for lease, they tended
to focus on upmarket properties where the rent was VND20 million a month, he
said, adding that they ignore the low cost end of the market.

Obstacles

The ministry analysts admitted there were many barriers
preventing investors from entering the low-cost segment of the market.

Capital is always a major problem for Vietnamese developers
who prefer selling their apartments to leasing them as returns are quicker for
sales.

An HCM City-based property investor said despite seeing the
great potential of the low-priced segment of the housing market he could do
nothing about it. He said it would take him decades to recoup his investment
and most of his funding came from bank loans.

Building houses for rent will not only help meet the
country’s housing needs but also remove volatility in land and housing prices,
according to one official from the Ministry of Construction.

The Ministry had recently called for policies to encourage
development of rental apartments, he said.

Ministry analysts said the Government should allow
developers to collect rent on land, eliminating the need to buy expensive land
and clear it.

Investors should also be given assistance to get cheap
loans, they added.

Source: VNS