Property prices in some major cities have declined nearly 60 per cent compared with figures posted at the end of last year, but experts say prices are still too high for many people to afford.
According to property management firm CBRE Viet Nam, as much as 80 per cent of the country's population can't afford to buy property.
It's been even more difficult to buy houses this year as banks have limited mortgages on fears of a 'bubble' property market, and the State Bank of Viet Nam is now restricting commercial banks' credit growth rates at 30 per cent.
According to Ministry of Construction data, the prices of land and apartments next to Van Khe and Van Phu urban areas, parts of the newly expanded Ha Noi, now range between VND10 million and VND20 million (US$600-1,200) per square metre.
As of August 1, Ha Noi officially tripled in area to about 3,350sq.km, taking in Ha Tay Province, Vinh Phuc's Me Linh District and some parts of Hoa Binh Province.
In original parts of the city, the price of a 60-70sq.m apartment ranges from VND700 million to VND 1.2 billion ($42,400-72,700).
The ministry calculated that if a couple can save VND5 million ($300) a month, it will lake them up to 16 years to afford a VND1 billion ($60.600)' apartment.
Nguyen Khanh Toan, a Ministry of Construction official, said the country's accelerated urbanisation rate and the Government's open policies such as allowing overseas Vietnamese and foreigners to buy dwellings in Viet Nam, were boosting demand for housing in the domestic market.
Experts say that while high property prices don't match average income levels, limited supply is pushing prices up.
Nguyen Trung Vu, director of Century property firm, said it was necessary to increase supply to meet market demands.
"Increasing supply means we need to develop large projects," Vu said, adding that strong infrastructure and facilities including schools, hospitals, parks, trade centres and offices were needed. Hoang Quan Real Estate Company Director Truong Thai Son said that the development of the property market needed support from the monetary market.
"Now that banks are limiting mortgages, enterprises and people are finding it difficult to find credit." he said. "This brings down the market, which causes a short-term supply shortage."
Pham Sy Liem, vice president of the Viet Nam Federation of Construction, said the property market was one of the backbone markets of the economy, contributing greatly to gross domestic product (GDP). He said its development would stimulate the development of other areas such as construction and building materials.
"If the real estate market freezes, it will generate a large amount of stagnant capital, which negatively affects the monetary market as well as the economy," said Liem. "Thus the problem requires Government regulation."
The Ministry of Construction said it was compiling a plan to develop the property market, which should be submitted to the Politburo for consideration in the first quarter of next year.
The plan was expected to help the market develop healthily and balance macro-level indexes, the ministry said.
The country's total housing reserve is now around 926 million sq.m, and is forecast to hit 1.27 billion sq.m in 2010, according to Ministry of Construction official Pham Khanh Toan. Urban housing growth rates average around 15 per cent per year.
Per capita housing spaces are now around 10.7sq.m and expected to reach 14.5sq.m in 2010.
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