WHY ARE HOMES STILL UNAFFORDABLE DESPITE RISING HOUSING SUPPLY?

More Housing Supply Does Not Necessarily Mean More Affordable Options

With around VND 1 billion in savings, a couple in Ho Chi Minh City initially planned to borrow approximately VND 2 billion to purchase a home worth around VND 3 billion. As more projects were launched, they expected to have a wider range of options within their budget.

However, after several months of searching, most apartments in locations convenient for their workplaces were priced between VND 4–6 billion. Properties priced at around VND 3–3.5 billion were generally located farther from the city center, resulting in longer commuting times.

Financing a purchase with a VND 2–2.5 billion mortgage over 15 years, at an initial promotional interest rate of around 10% per year before switching to a floating rate, could require monthly principal and interest payments of approximately VND 27 million.

For the couple, this would account for a significant share of their household income, while the repayment burden could become even heavier once the promotional period ended.

They eventually decided to continue renting rather than take on a large long-term financial commitment.

Their experience reflects a broader challenge in the market: although the number of properties available for sale has increased, many products still do not align with buyers’ expectations in terms of location, pricing and borrowing capacity.

Supply Is Rising While Absorption Is Weakening

Data from Dat Xanh Services (DXS-FERI) shows that around 37,300 new residential products were launched nationwide during the first half of the year, up 16% year on year.

Total primary supply exceeded 102,400 units, representing an increase of approximately 40%. However, sales fell 12% to around 26,100 units, bringing the average absorption rate down to only 20–30%.

The figures highlight a notable imbalance: the quantity of housing supply has improved, but its accessibility to homebuyers has not increased at the same pace.

One major reason is the geographical distribution of new developments. Developers are increasingly moving projects toward suburban and peripheral areas, where land availability and development costs are generally more favorable. However, these locations may not match the needs of buyers who work in central urban areas.

According to CBRE Vietnam, Ho Chi Minh City recorded 6,573 newly launched apartments in Q2, up approximately 20%. Nearly 80% of this new supply came from the former Binh Duong area.

This suggests that the challenge is no longer simply about the volume of housing supply, but also about where new homes are being developed and whether their location and pricing match actual demand.

High Prices Remain a Major Barrier

Even buyers willing to move farther from the city center may struggle to find genuinely affordable housing.

Experts attribute high primary-market prices to rising development costs across multiple areas. Labor costs are estimated to be 30–50% higher than two years ago, while construction materials and financing expenses have also increased.

For developers, a project can take four to five years from land acquisition and legal procedures to the point when products are finally launched. During this period, financing costs continue to accumulate, alongside expenses for project development, marketing, brokerage and sales support programs.

As overall development costs rise, significant reductions in final selling prices become increasingly difficult, even for projects located outside the city center.

The market’s pricing data reflects this trend. Average primary-market prices reached approximately VND 76 million per square meter, up 16% year on year, while secondary-market prices stood at around VND 62 million per square meter, representing a 26% increase.

Affordable Housing Is Becoming Increasingly Scarce

The shortage of reasonably priced housing is particularly evident in the former Ho Chi Minh City area.

According to Savills Ho Chi Minh City, the market recorded only around 3,700 newly launched apartments from seven projects during the first half of the year. All new launches were priced above VND 90 million per square meter, with approximately 80% exceeding VND 120 million per square meter.

Meanwhile, apartments priced below VND 50 million per square meter have become increasingly rare.

The relocation of new developments toward peripheral areas has also failed to produce price reductions proportionate to the greater distance from the city center. In some areas, transportation infrastructure and public amenities have yet to catch up with the pace of residential development.

As a result, buyers increasingly face a difficult trade-off: pay a premium for a more convenient location or accept a lower-priced property farther away, along with longer commuting times.

Higher Interest Rates Further Reduce Affordability

If housing prices represent the first major barrier, borrowing costs have become another factor making homeownership more difficult.

Savills estimates that average mortgage rates are currently around 13% per year, approximately four percentage points higher than the same period in 2025. With property prices already elevated, higher interest rates are significantly increasing the overall cost of homeownership.

The current lending environment is also considerably less favorable than a year ago. Previously, buyers could access mortgages at rates of around 6.5–6.8% per year, with rates fixed for two years. Today, similar loans may carry rates of around 10.5–11%, with promotional rates fixed for only the first year. After that, borrowers may face floating rates of approximately 13–14% per year.

For example, consider a VND 3 billion property financed with a 70% mortgage, equivalent to VND 2.1 billion over 20 years. At an annual interest rate of 9%, the monthly repayment would be around VND 19 million. If the rate rises to 13%, the monthly payment could approach VND 25 million.

Under a rule of thumb that debt repayments should not exceed 40% of household income, a family with such a mortgage would need a stable monthly income of more than VND 60 million. This remains a relatively high threshold for many salaried households in major Vietnamese cities.

A Modest Price Correction May Not Be Enough

Even if housing prices decline by a few percentage points, affordability may not improve substantially.

For a VND 3 billion property, a 5% price reduction would amount to VND 150 million. However, buyers would still need to prepare a substantial amount of equity and maintain the capacity to service a large mortgage over many years.

This pressure could also spill over into the secondary market. Many home loans come with promotional rates for only six to 18 months before switching to floating rates. As loans originated during 2024–2025 progressively enter the floating-rate period, higher monthly repayments could prompt some homeowners to consider selling their properties.

This could increase secondary-market supply at a time when purchasing demand remains relatively weak.

Housing Supply Must Be Matched With Purchasing Power

The composition of buyers is another factor affecting market liquidity. According to DKRA data, investors account for approximately 70–75% of buyers, with around 80% of them using financial leverage.

As interest rates rise to 10–14%, this group is becoming more cautious, as higher financing costs reduce investment returns and increase cash-flow risks.

Over the next six to 12 months, new housing supply is expected to continue entering the market in line with developers’ project plans. However, if product structures, selling prices and borrowing costs remain largely unchanged, the market could face a situation in which inventory increases while housing affordability fails to improve significantly.

The key issue facing the market is therefore not simply “how many homes are being offered for sale,” but rather “how many of those homes are genuinely affordable for households seeking to buy a home to live in, given their income and borrowing capacity.”

A sustainable recovery in the housing market will require a better alignment between supply and household purchasing power, not only in terms of selling prices, but also location, unit size and the financing costs associated with homeownership over the long term.