Options for First-Time Homebuyers in Ho Chi Minh City

• Demand for homeownership remains a significant priority in Ho Chi Minh City (HCMC) and surrounding provinces, particularly for the younger population.
• These buyers will play an important part in market recovery, according to experts from Savills Viet Nam.
• This article explores the options younger buyers have and what possibilities the market presents.

Long-Term Planning

Su Ngoc Khuong, Senior Director of Investment at Savills, states that flexible real estate options could be a feasible solution for newlyweds without significant housing pressure.

"Young couples don’t necessarily need to buy a house to move into immediately. Instead, they can invest in a property and pay between 30% to 50% and can borrow the remainder from the bank," said Khuong.

An option in this case is buying an undeveloped property. While these do not offer immediate handover, they do give buyers flexibility as they offer longer payment schedules. Rather than saving in a low-interest bank account, they can invest in an apartment that will be developed in the future.

"Flexible payment schedules allow buyers to ‘deposit’ money into an asset rather than a bank account. This means payments can be made over two or three years, however, at the end of the day, you will walk away with an asset rather than simply cash in a bank account,” the expert added.

However, when implementing this approach, Khuong insists that buyers should consider if they truly need a home and if they have sufficient existing savings. Buyers should also consider their borrowing capacity and whether their incomes and access to funds are sufficient to cover both principal and interest.

"For those who are renting, the desire to own a home is often significant. However, it is necessary to approach this issue carefully and cautiously, while also enhancing financial resilience," he added.

For those who need to move into a house immediately, the expert suggests buying an apartment or townhouse. While this does require them to pay 100% of the value, buyers can pay a portion upfront while utilising loans for the remaining amount. Increasingly developers are leveraging loan access as a sales incentive, which buyers can utilise to enter the housing market.

Housing Supply in 2024

Residential performance is likely to remain subdued in the short term, prolonging the downturn felt since late 2022. According to Giang Huynh, Associate Director, Head of Research and S22M, factors restraining the market may persist into 2024. These include difficulties in cash flow, the pressures investors are feeling to repay bond debts, low liquidity, and subdued buyer sentiment.

"However, we do expect recovery eventually given the Government's efforts to promote public investment, develop infrastructure, and enhance transparency in real estate," Giang said.

Giang states that real estate in HCMC will recover first, followed by neighbouring provinces such as Binh Duong and Dong Nai. This is because is the economic hub of the region with significant housing demand.

In terms of supply, Giang forecasts a gradual recovery of supply from next year, which will be a significant driver in 2024. Some projects in HCMC offered payment over 24 months with only 20% needed for SPA.

"According to Savills Viet Nam data, in 2024, the future supply in Ho Chi Minh City will include more than 16,000 apartments and 2,000 villas and townhouses. Neighbouring provinces like Binh Duong and Dong Nai, with large land reserves, will have more than 6,000 villas and townhouses and over 9,000 apartments," Giang said.

From the project development perspective, experts believe that if investors can implement projects on schedule, with reasonable selling prices and transparent legal aspects, they will attract buyers and gradually restore market liquidity. The Government's responsibility in resolving legal difficulties for real estate projects also plays a crucial role in supporting market recovery.