Duong Duc Hien, director of Residential Sales, Savills Hanoi, believes that without this help, home ownership for under 35s would be challenging.
“Admittedly there is a gap between young buyers’ income and housing prices in big cities like Hanoi and Ho Chi Minh City. A mid-end two bedroom apartment in Hanoi costs US$140,000-200,000, close to developed markets’ average, while the average income in Vietnam is nowhere near,” said Hien.
According to the results of the mid-term Population and Housing Survey, the home ownership ratio was 90.8% in 2014, slightly dropping from the 92.8% in 2009.
However, a closer examination indicates that this high ratio is the result of inheritance or significant financial support from the older generation.
According to Sophie Chick, head of Residential Research, Savills Sydney, housing affordability is a particular issue in developed economies, but not irrelevant to recently emerged ones, such as Vietnam.
Chick expected that the scarcity of equity among first-time buyers and limits to affordability in many Western countries will act as an effective ceiling to housing prices resulting in lower price growth.
Meanwhile in Vietnam, Hien believed this issue will encourage buyers to use financial solutions, which are yet to be popular. The growth of the Vietnamese economy in the coming years will hopefully increase the average income and bring it closer to housing prices.
Housing affordability has become a worldwide issue since the global financial crisis, partly because mortgage lending has been significantly curtailed by regulations. It is the younger generations, usually needing the highest loan-to-value ratios and loan-to-income ratios, who are most affected.
In developed markets, this has become evident. In Australia, the share of homeowners aged 25 to 34 is 45%. In the US, the current rate is 31% for under 35s, while, in the UK, only 5% of housing equity is owned by the under 35s, who are now paying four and a half times as much in rent to landlords as they are in mortgage interest.
Chick added that this generational effect goes beyond the financial crisis and “is symptomatic of how equity has become concentrated in older generations through a history of home ownership, mortgages, and price rise."