• Affordable housing is a challenging issue around the world, both in developed and developing markets.

• In Japan, China, and Viet Nam, Savills research shows that this is a localized problem, concentrated in large urban areas with rapid economic growth.

• In Ho Chi Minh City and Ha Noi, the infrastructure system connecting to neighbouring areas is a major driving force to improve bottlenecks in land funds and investment costs, thereby improving affordability.

Global housing supply has failed to keep pace with rising populations. Boosting supply levels needs to be at the heart of any housing affordability strategy.

Different dynamics around affordable homes in Asia

Different dynamics around affordable homes in Asia. The Asian markets profiled here differwidely from each other and from other international markets. Nonetheless, they face similarchallenges.

China is unique in that it has built a substantial number of homes over the past decadewhile population growth has come to a standstill. However, urbanisation continues – inparticular the migration of workers from provincial areas to first-tier cities such as Shanghaiand Beijing.

As a consequence, says James Macdonald, Head of Research at Savills China, housing affordability is not a China-wide issue. “It is a first- and second-tier city issue. As with manyglobally competitive cities, most companies tend to congregate around a few citiesgenerating jobs and attracting talented workforces.”

Image 1 | The affordable housing shortage is primarily concentrated in the first-and-second-tier cities of China.

Another factor driving unaffordability, he says, is that housing is a preferred investment in a nation with few alternatives. The cost of holding property is minimal, so many investors leave the homes they buy empty. China is working to solve these problems – byencouraging the development of rental housing, for example.

As in China, housing affordability is a problem only in certain areas of Japan. While theoverall population is declining, large and dynamic cities such as Tokyo and Osaka aregrowing: net migration in Tokyo rose by more than 125,000 last year. Rents and prices have been rising in Tokyo and limited supply is likely to accelerate this trend, despite the deliveryof a considerable amount of new housing at a national level.

Furthermore, the overall picture is complicated because Japan’s housing stock is constantly demolished and rebuilt, meaning many new homes are not adding to the overall volume.

Singapore has one of the most sharply divided two-tier markets in the world. More than three-quarters of the population lives in housing built by the nation’s Housing DevelopmentBoard (HDB), which creates public housing for sale. This allows 90% of citizens to own theirhome.

The private housing or “condo” market is regulated to protect citizens and permanent residents: foreigners buying property must pay 60% stamp duty. Nonetheless, populationgrowth since the pandemic has driven sharp rises in rents and prices in the condo market.

Infrastructure to power Affordable housing in Viet Nam

At around 6% of GDP, national Government spending on infrastructure delivery is ambitious. The disbursement is across a wide variety of typologies, including roads, bridges, airports, ports, and rail.

Troy Griffiths, Deputy Managing Director at Savills Viet Nam said: “The revised Land Lawwill hasten infrastructure delivery by utilising market value frameworks. Importantly much ofthis infrastructure is improving connectivity through roads, highways, bridges, and ringroads. This will better connect outlying areas with the CBD, its workspaces, facilities, and amenities"

Image 2 | The Nhon - Hanoi Station urban railway section has recently been in operation. Photo: VGP.

The infrastructure delivery brings the CBD ‘closer’ to the outlying areas, by reducing traveltimes. This is most noticeable with Transport Orientated Development (TODs) such as the Metro systems, which will enable large-scale high-density development along the route,and make commuting from outlying areas far more efficient. It also gives developers accessto lower-priced land that can deliver more Affordable housing, as the land component isreduced.

And this is where the context bites. Ha Noi and HCMC do not have overly restrictive geographies that neatly separate the adjoining conurbations. Nearby provinces are beingeffectively drawn into the major cities, that continue to extend their boundaries. With the infrastructure delivery, travel times are reduced giving outlying areas easier access to theheart of the cities. More Affordable housing can also be created as developer acquisition costs are lower. The price points of adjoining provinces are substantially lower and far more affordable than the ‘proper’ cities. Binh Duong and Bac Ninh show this clearly, both havingaverage prices around $1,500/sq m NSA that are ‘affordable’.

According to Giang Do, Advisory Director at Savills Viet Nam, the cycle of ownership andequity builds from small affordable units, and then as family and equity are gathered, occupiers move to larger residences. A common aspiration over time would be from studiothrough to villa, then downsizing in later years. It is implausible that first homeowners canafford the better locations.

Image 3 | Do Thi Thu Giang, Director, Advisory Services Ho Chi Minh City.