The Common Rule of Thumb: Spending No More Than a Third of Income on Housing

In Hanoi and Ho Chi Minh City (HCMC), the average monthly incomes for the top 20% are only VND14.5 million (US$571.4) and VND13.3 million, respectively, according to the General Statistics Office. However, a new report by the Vietnam Association of Realtors reveals that a 60-square-meter apartment in these cities costs an average of VND3.5 billion.

The Financial Strain of Mortgage Payments

If a couple borrows 70% of the property's value at the current interest rate of 8%, the monthly mortgage payment on a 20-year loan would be VND25-27 million. Even if both partners are in the top 20% bracket and earn a combined VND30 million a month, the monthly loan repayment would still far exceed a third of that amount.

Impact on Lower-Income Groups

The association noted, "If even the top earners in the country have difficulty [buying a home], lower-income groups have almost no chance." A recent study by real estate trading platform Batdongsan found that it takes nearly 25.8 years for the average worker in their 30s to pay off the mortgage for a 60-square-meter apartment priced at VND3 billion at an interest rate of 4.5%.

Factors Contributing to Declining Affordability

Several factors are blamed for the sharp decline in affordability, including the rapid increase in housing prices, the shortage of affordable housing, speculation, and high mortgage costs. The ratio of property tax to GDP in Vietnam is only 0.03%, significantly lower than in other countries, which encourages speculation.

Recommendations for Boosting Affordability

To boost affordability, the association recommends that the government offer more incentives to promote the development of affordable and social housing, improve infrastructure, and implement a comprehensive tax policy to keep property prices from rising too fast.