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Cheap urban housing key for high growth

Update: December, 16/2015 - 09:27
Illustrative Image. — VNA/VNS Photo

HA NOI (VNS) — As Viet Nam continues to urbanise rapidly, adequate supply of affordable housing will be integral to achieving national development targets and enabling the country to maintain a high rate of growth, with cities contributing a growing share of jobs and GDP, according to World Bank.

A bank report titled "Viet Nam Affordable Housing - A Way Forward" on Monday says the structural shift out of rural areas and towards a higher-productivity manufacturing and service-based economy will drive population growth and new demand for housing in cities.

The share of the urban population is expected to reach 50 per cent by 2040, with an estimated 374,000 additional units needed in cities each year to cope with demand.

"Urbanisation has been used as a tool to accelerate economic growth and poverty reduction in many countries around the world, and affordable housing will be instrumental to helping Viet Nam achieve its goals for increasing productivity and inclusive urban growth."

According to the report, despite economic growth, Viet Nam still has a substantial deficit of quality housing. Almost 20 per cent of households, or approximately 4.8 million, are still living in poor conditions. Meanwhile, the majority of new demand for housing will be concentrated in a few major cities and industrial zones.

Together, the Red River Delta surrounding Ha Noi and the south-eastern region around HCM City will account for around two-thirds of the new demand.

Viet Nam has experienced several phases of housing policy in the past. Following liberalisation of the sector, growth in the real estate sector spurred by foreign direct investment and speculation led to significant home price increases and supply in the luxury market that eventually resulted in a real estate bubble from 2009-12.

The VND30 trillion (US$1.3 billion) stimulus package in 2012 helped reorient developers and lenders towards the affordable middle-income market where there is real home ownership need.

Amendments to the Housing Law passed in 2015 provide a strong legal framework for reforms with a new focus on supporting self-built housing, an active role for the private sector in housing, and addressing the shortage of affordable rental housing, especially for workers in industrial zones and students.

Towards that end, this report, which includes a comprehensive sector assessment and roadmap for affordable housing in Viet Nam, makes some key recommendations to increase and reorient government spending in the housing sector; develop a national affordable housing programme, prioritise structural reforms to improve governance of the housing sector and urban land management; and support market development.

Accordingly, government spending should focus on programmes that support and target the lowest two income quintiles and high growth cities, where the need for housing is most urgent.

A housing programme will act as a vehicle to implement the Housing Law and structure the government's interventions in the housing sector, the report says. This programme would include initiatives to improve access to housing finance, stimulate supply of affordable rental housing and enable delivery of core housing to support the self-built housing sector.

Regarding structural reforms, specific priorities are to strengthen an overarching co-ordinating body that includes all stakeholders and orchestrates implementation of selected housing initiatives, and to reform the land taxation framework.

And the market development will be supported by investing in the building blocks of a functioning housing sector, including regulatory reforms to incentivise greater private sector participation and improving real estate information systems and monitoring and evaluation standards. — VNS

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