Profit expectations, high development costs, strong investment demand, and limited supply have all contributed to the persistent rise in housing prices, experts say.

According to the report by the Ministry of Construction, during the first three quarters of this year, housing prices in Hanoi and Ho Chi Minh City reached their highest level in the past decade. In Hanoi, the average apartment price climbed to VND 80 million per square meter, up 33% year-on-year, while the prices of townhouses ranged from VND 100 million to 200 million per square meter.

In Ho Chi Minh City, apartment prices surged 36%, reaching VND 89 million per square meter, while landed houses were priced between VND 230 million and 300 million per square meter.

Similarly, research from real estate consulting firms Knight Frank, Savills, and CBRE shows that in the second quarter, primary apartment prices (new supply) in Ho Chi Minh City ranged from VND 80 million to 120 million per square meter, and in Hanoi from VND 75 million to 85 million per square meter, representing an annual increase of 10%–30%. Since the July 1st merger, the average selling price in Ho Chi Minh City has continued to rise by another 8%–18%.

As the gap between housing prices and income continues to widen, bringing prices back to a reasonable level has become a pressing issue. However, with development costs rising relentlessly, making sale prices more aligned with the public’s income remains an unsolved problem.

Can Van Luc, an economist, noted that the burden of costs is the direct reason for the persistent increase in housing prices. He explained that land and site clearance compensation now account for an increasingly large share of total expenses. When the new land price framework approaches market value, developers’ land-related financial obligations rise sharply. In addition, rising material and labor costs and high bank lending rates collectively push total project development costs upward. These costs are inevitably passed on to homebuyers, making it difficult for prices to decrease.

Furthermore, the land price framework and methods for calculating land use fees (phương pháp tính tiền sử dụng đất) are also considered direct contributors. Adjusting the land price framework closer to market prices has led to a surge in land-related financial obligations, further driving up development costs, as these additional expenses ultimately become part of housing prices.

Real Estate in Central Ho Chi Minh City

Dr. Pham Viet Thuan) Director of the Institute for Natural Resources and Environmental Economics, Ho Chi Minh City , argued that the deeper root of the issue lies in developers’ project strategies. When developers set excessively high profit targets and focus primarily on high-end projects, overall price levels are structurally driven upward. He said, “Apartment prices are always higher each year, and once they go up, they rarely come down,” since all input costs—from building materials to land—are ultimately reflected in the selling price paid by homebuyers.

Ngo Quang Phuc, General Director of Phú Đông Group, one of the major southern developers, stated that persistently high housing prices stem from a multilayered cost structure, the largest component being land. Soaring compensation prices have forced developers to spend huge sums upfront for site clearance, with some projects taking over a decade to complete, causing costs to multiply. In addition, slow administrative procedures and unpredictable land-related financial obligations have led to drastic cost increases—projects that once required only VND 20–30 billion for land-use fees now demand VND 100–200 billion.

Besides cost burdens, experts also point out that an imbalance in the product structure contributes to rising housing prices. The market faces a severe shortage of mid- and low-priced housing, while most developers focus on high-end products to maximize profits.

To bring housing prices back to a more reasonable level, many experts suggest that a comprehensive approach is required—from legal reforms, land planning, and credit policies to a national housing development strategy.

Dr. Can Van Luc believes that the biggest bottleneck today lies in administrative procedures. He noted that many projects are stalled not because of funding shortages but because of prolonged approval processes, leading to supply constraints and rising prices. If this issue is reformed, thousands of projects could enter the market sooner, increasing supply and stabilizing prices.

Meanwhile, Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), stated that to reduce housing prices, the government must cut down land-use fees and site clearance costs. Currently, these two components account for about 10% of the total investment cost of high-rise apartment projects, 30% for townhouses and shophouses, and over 50% for villa projects.

“The government should employ multiple tools such as flexible adjustments to land-use fee policies, allowing one-time or installment payments,” he said. “Real estate developers should stand with homebuyers and accept reasonable profit margins instead of pursuing excessive returns.”

In fact, the phenomenon of housing prices far exceeding income levels is not unique to Vietnam but also occurs in many other countries. Analysts point out that the difference is that those countries implemented sustainable housing strategies earlier, developing social housing and using tax and planning measures to regulate the market.

Currently, Vietnam has yet to impose property or speculative taxes, leaving the market without effective control mechanisms. When demand exceeds supply, buyers are willing to pay more, creating a cycle of price-locking, hoarding, and speculative overheating.

Therefore, Mr. Le Hoang Chau suggests that another fundamental solution is for the government to introduce a vacant property tax as soon as possible and impose taxes on second homes to discourage speculation. At the same time, authorities should manage supply through planning and housing development programs.

Facing supply-demand imbalance, Assoc. Prof. Dr. Dinh Trong Thinh) believes that the focus should be on developing mid- and low-priced housing as well as social housing. He noted that this segment has been stagnant for years, while commercial housing prices have skyrocketed.

He also emphasized that prioritizing the allocation of public or low-cost land for enterprises to develop affordable housing is a crucial measure. “Although construction costs are difficult to reduce, the government can designate such land for affordable housing development,” he said, adding that “with proper support, developers will be motivated to enter low-profit segments, helping to lower overall housing prices.”

In the long term, Dr. Dinh Trong Thinh stressed the need for a clear housing finance strategy, coupled with preferential capital sources, interest rates, and loan terms, to make homeownership more accessible. He added that unfreezing thousands of suspended projects will be a major driver in increasing supply and meeting real housing demand.

Experts are looking forward to the upcoming Land Law 2024, which is expected to address the key bottlenecks in land development. When legal procedures become smoother and more clean land is made available for housing projects, the market will see more new developments. This is considered the most sustainable approach to lowering housing prices and promoting the growth of social housing projects.