Long-term Housing Tenure: Solutions to Vietnam Property Market

An apartment with a usable area of 30 - 70 square metres is rented at VND190 - 331 million in 6 - 12 years. Or, tenant pays VND5 million a month to own the residence after a few years. This solution is an effective cure to the currently frozen realty market.

 

This is a totally new segment of property market. The presence of this segment reflects the agility of property businesses to cope with market slumps. Currently, many investors are building leasehold estates for customers with a monthly income of VND10 million.

 

Owner of a project in Tan Binh district, Ho Chi Minh City is advertising for rent a 32-square metre apartment for VND190 million in six years and VND331 million in 12 years. The rental for a 65-square metre apartment is VND408 million in six years and VND710 million in 12 years. On a monthly basis, the rental fee for a 32-square metre apartment is only about VND3 million. This is a very competitive rate in big cities.

 

Once-paid rent for a 32-square metre apartment is VND190 million for six years and VND331 million in 12 years. Likewise, a 65-square metre apartment takes VND408 million of rents in six years and VND710 million in 12 years. On average basis, a monthly rent is about VND3 million a month, inclusive of VAT. In addition, the tenant will pay the other management costs.

 

While most people cannot afford to buy houses because prices have been pushed up far from real values, this option is seen very potential. Previously, serviced apartments were very expensive to rent and affordable for mostly foreigners. Monthly rent for an apartment is multi-thousand US dollars. But, now a low income earner can dream of owning such a dwelling in a long time at a reasonable cost.

 

In localities with many industrial factories like Binh Duong province, residential land price is falling. A 100-square metre plot is advertised for sale at VND200 million. Apartment prices are affordable for local people. A house in Vietnam-Singapore Industrial Park is sold at VND90 million.

 

FPT Land Company, a member company of software producer FPT Corporation, announced to build cheap apartments in Da Nang City where buyers only need to pay VND5 million a month to own the property. After four years, they will wholly own the leasehold estate.

 

For low-income earners, this form is only effective when they use their own money, not loan, to buy. The financial burden on them will be very heavy if they have to pay interest rate of 17 - 20 percent per annum on a loan of VND200 - 300 million. This will push up their spending on housing. If they invest with their own money, they will enjoy price advantages because rents increase incrementally.

 

However, it is very difficult for workers to prepay up to VND200 million for dwelling as they may change their jobs someday in the future. Besides, they are familiar with monthly pays. So, it is very hard to persuade them to pay for the tenancy in 6-12 years time.

 

Currently, housing tenure is burgeoning in the southern region. This is partly because the real estate market is on the fall and partly because there are a lot of migrant workers. In the north, this segment is not developing strongly. This segment was created to help real estate companies to cope with difficulties and public interest in this segment is quite clear. This creates the confidence and motivation for real estate companies.