Six reasons for the skyrocketing housing prices

This was shared by Dr. Cấn Văn Lực, a member of the National Financial and Monetary Policy Advisory Council, during the 2025 Annual Meeting of the Executive Committee and Members of the Vietnam Real Estate Association.

Credit and foreign direct investment (FDI) have shown clear improvement. From an economic growth perspective, Dr. Lực noted that Vietnam’s real estate sector grew by 3.34% in 2024, a significant jump from just 0.24% in 2023. The construction sector also saw growth of 7.87%, suggesting that capital flows and development activities are gradually reviving. However, he emphasized that this is not yet a breakthrough, as the market continues to face notable headwinds.

In the first quarter of 2025, commercial housing supply tripled year-on-year but remained only half the volume seen in Q4 2024. Transactions in apartments, standalone homes, and land plots also showed signs of recovery, with volumes doubling from the same period last year. Still, the overall transaction scale was only 50% of the previous quarter.

Despite the encouraging momentum brought about by the new Land Law (2024), Housing Law (2023), Real Estate Business Law (2023), Decree 35/2022/NĐ-CP, and increased infrastructure investment, Dr. Lực believes that stronger recovery could be on the horizon in the upcoming quarters.

Nevertheless, real estate prices continue to surge, making it increasingly difficult for the average citizen to afford housing. Between 2019 and 2024, home prices in Vietnam rose by 59%, outpacing increases in the U.S. (54%), Australia (49%), Japan (41%), and Singapore (37%). Dr. Lực pointed out that, at the current rate, an average civil servant would need nearly 26 years to afford a home.

He identified several key reasons behind the persistently high housing prices.

First, regulatory and legal bottlenecks have delayed project approvals and construction permits. Administrative reluctance due to fear of accountability has restricted new housing supply.

Second, rising input costs, including those associated with land, site clearance, financing, and construction materials, have significantly driven up development expenses.

Third, there is a mismatch between supply and demand. Many developers have focused on the high-end market to maximize profits, while affordable and mid-range housing, including social housing, remains severely lacking.

Fourth, market manipulation and speculative pricing are prevalent. Irregular land auctions, price rigging in the social housing segment, and non-transparent information have pushed prices far beyond actual value.

Fifth, speculative activity is widespread. A 2024 survey by Batdongsan.com.vn revealed that 86% of buyers held real estate for less than a year, indicating rampant short-term speculation that increases market volatility.

Lastly, tax policies have not been effective in curbing speculation. Vietnam does not currently impose a property ownership tax, while transaction and rental taxes remain low, encouraging speculative investment in real estate.

Long-Term Solutions Required

Dr. Lực emphasized that sustainable recovery and healthy development of the real estate market require comprehensive solutions, including legal reforms, streamlined administrative procedures, preferential credit mechanisms, and a more robust tax system to control speculation and support genuine buyers.

Accelerating the development of social and affordable housing, while ensuring transparent market information, is essential to stabilize prices and improve accessibility over the medium and long term.

Additionally, concrete and practical measures are needed to stabilize and gradually reduce property prices, particularly in the housing segment. This includes addressing existing inefficiencies, diversifying capital sources, developing real estate finance through the corporate bond market, establishing a national housing fund and real estate investment trusts (REITs), promoting cashless transactions, and implementing a phased approach to property taxation.

Building a comprehensive database on land, real estate, and housing is also crucial. Effective mechanisms must be created to manage and utilize this data. Alongside this, pushing for digital transformation and green development in land, construction, and real estate sectors will be key to improving governance and promoting sustainable growth.

For real estate businesses, Dr. Lực advised continued operational restructuring, with a strong focus on managing cash flow risks and maturing debt.