During the 2000-2011 period, house prices saw a tenfold increase, compared to the value of gold (7.3 fold), the US dollar (1.5 fold), saving interest rates (2.2 fold) and the CPI (2.2 fold).

This has been put down to the lack of transparency in management as well as speculation.

Lack of transparency

Dr Le Xuan Nghia, former Head of the National Financial Supervisory Commission (NFSC), argues that speculation is not a reason for real estate price hikes in a long time.

Speculation can only cause a 10-15 percent spike in a short period of time, he says, adding that the lack of transparency in the management of real estate market is the root of the problem.

International experts underscore other reasons such as poor planning to meet migrant workers’ demand for accommodation, and slow progress in housing projects for low-income earners.

Complicated procedures and land-grab scandals also contribute to driving up real estate prices in Vietnam to a world record high, they say.

Bui Duc Trung, Deputy General Director of the Petrowaco Joint Stock Company, cites another factor that is too much time spent on preparations for real estate projects to get off the ground.

Discount cannot improve liquidity

Judging by the current situation, many real estate investors have offered buyers special discounts, but this is of little help to improve the liquidity of the market.

Le Hoang Hoan, General Director of the VietLand Group, says the supply of houses and apartments is still far from meeting the demand of low- and middle-income people.

Most people can only afford to buy small apartments at the price of less than VND1 billion (US$50,000) while there is an abundant supply of luxury apartments worth VND2-3 billion (US$100,000-150,000), he says.

The lowest price of land in Hanoi hovers around VND70-80 million per sq.m. This means that the average income earner (US$1,200 per year) will have to work 90 years without spending if he wants to own 30 sq.m of land in Hanoi, Hoan notes.

A Deputy Minister of Construction says even a Minister has to save money in 40 years for the purchase of an apartment.

What’s lacking here is credit policies to support employees in need of housing.

Vietnam has a house price to household income ratio of 26.6, much higher than other countries in South Asia (6.25), East Asia (4.14), Africa (2.21), Europe, the Middle East and North America (2.38).

According to the UN, the ratio should be just 3 or 4 percent.

The Ministry of Construction estimates that as many as seven million people in cities need houses or apartments covering 150 million sq.m.

Hanoi alone has to build 110,000 apartments (totaling 5.5 million sq.m) for workers in industrial parks, the ministry says.