Vietnam’s Booming Real Estate Market and Its Challenges

Over the past five years, the Vietnamese real estate sector has seen an impressive price increase of 59%, outpacing growth in markets like the U.S., Australia, and Japan.

For typical young Vietnamese adults, purchasing a 3-billion-VND (approximately $122,000) apartment necessitates more than 25 years of savings, reflecting a widening gap in affordability.

During the Vietnam Real Estate Conference 2024 on December 3, economist Can Van Luc underscored that new laws regarding land and housing will significantly influence market dynamics in the upcoming years.

Nguyen Quoc Anh, Deputy CEO of Batdongsan.com, added that although Vietnam’s property prices have surged by 59% in five years, this still tops the U.S. at 54%, Australia at 49%, Japan at 41%, and Singapore at 37%.

Interestingly, while property prices are rising swiftly, rental yields in Vietnam are relatively low, averaging only 4%. In contrast, countries such as the Philippines, Malaysia, Thailand, Indonesia, and the U.S. enjoy yields between 5% and 7%.

Quoc Anh explained that Vietnam’s economic growth and rising inflation are driving the property price boom. With a 34.8% rise in GDP per capita—outpacing the global average of 20.8% and 22% for other developing nations—real estate has become a favored investment for Vietnamese citizens.

Unlike the unpredictable nature of gold and the low returns on foreign currency and savings, real estate offers stability. In the last ten years, average returns on apartments have climbed by 197%, and land plots increased by 137%, establishing property as the top-performing asset class in Vietnam.

Despite this market potential, younger generations face significant barriers to homeownership. Insights from Batdongsan.com show:

• In 2004, a Gen X individual needed 31.3 years of income to buy a 60-square-meter apartment costing 600 million VND, with a savings rate of 7.4%.
• By 2014, a millennial required 22.7 years of income for a similar apartment that had risen to 1.5 billion VND, while the savings rate fell to 6%.
• Fast forward to 2024, and a Gen Z buyer would now need 25.8 years of income for the same apartment priced at 3 billion VND, despite a further dip in the savings rate to 4.5%.

This escalating challenge in affordability showcases the ongoing difficulties facing homebuyers in younger age groups, even with lower interest rates in play.

Nevertheless, property ownership continues to hold immense significance in Vietnamese society. The country boasts a remarkable homeownership rate of 90%, surpassing nations like Singapore (88%), Indonesia (84%), the U.S. (66%), and Australia (66%).

This strong preference for owning property is rooted in cultural traditions, the belief in real estate stability, and the relative underdevelopment of other financial alternatives. Property ownership is not just a financial goal; it’s often seen as a symbol of prestige and essential for family well-being.

With legislative changes and positive economic developments on the horizon, Vietnam’s real estate market is set to expand further. However, addressing the issue of affordability for younger generations remains a vital concern that necessitates innovative approaches and long-term strategies.