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Tiếng ViệtHow do current real estate developments in Vietnam compare to those in Hong Kong?
Hong Kong’s 2015 Real Estate Policy Reforms
- Prevention of public land acquisition by major developers at unfavorable terms
- Increased real estate transfer taxes to curb speculative investment
- Stricter licensing restrictions on residential construction to manage traffic density and congestion concerns
- Notably, Hong Kong did not implement second-home taxation, unlike the United States and European markets
- Consequently, property prices did not decline but rather accelerated sharply upward
The Underlying Factors
1/ Developers lack access to public land, forcing them to acquire private land at premium prices for development projects.
This constraint created two primary development strategies:
- Development in central Hong Kong becomes economically viable only for luxury segments, with developers often acquiring and redeveloping older central properties as high-end projects
- Suburban expansion for mid-range residential development, which paradoxically pushes suburban property prices to premium levels
- Lower-margin industries relocate to suburban areas due to inability to afford high-end central locations, driving significant suburban population growth from 2016 onward and elevating property costs throughout the territory, not just in the center
- The affordable housing segment that previously thrived in suburban areas has largely been displaced by mid-range residential development
2/ What if the real estate transfer tax increases? People still need a place to live. They will find every way to own a home, even if it means paying additional taxes to the government (which are ultimately passed on to the buyer as they are added to the selling price).
After several rounds of transfers, taxes in Hong Kong have driven real estate prices even higher. What happens next? Those who cannot afford to purchase must rent. As more people seek rental properties, rental prices for townhouses and apartments increase, which in turn drives up property prices (since rental yields remain attractive and are unaffected by inflation or negative real deposit interest rates—when income cannot keep pace with inflation, investors turn to real estate rental as an alternative).
This initially impacts apartments, as they are the preferred choice for lower-income and middle-income buyers with genuine housing needs. Rising apartment rental prices subsequently push up apartment purchase prices, which then elevates surrounding real estate values.
Misguided policy decisions—whether inadvertent or deliberate—have brought Hong Kong’s housing crisis to an alarming level.
To address this crisis, the Hong Kong government has had to approve the construction of 10-square-meter apartments to serve buyers with limited purchasing power. This concept gave rise to the global phenomenon of “matchbox apartments.”
The price of a 10-square-meter matchbox apartment in Hong Kong in a desirable location currently ranges around USD 200,000 or more, and these units command exceptionally strong rental yields.
3/ Successive matchbox projects command higher prices than their predecessors due to land scarcity. Any remaining available land faces density restriction challenges.
How is Ho Chi Minh City beginning to resemble Hong Kong? This is precisely why HOREA advocates for building 25-square-meter apartments. In District 9, where apartment projects have recently proliferated, ultra-compact units under 50 square meters are common. Studio apartments of just 20 square meters are also experiencing strong demand.
Many market analysts contend that newly launched apartments are priced excessively. However, if ten developers simultaneously launch projects and all ten are priced above market expectations, the situation tells a different story. This suggests that market pricing has naturally escalated across the board.
Some experts argue that existing apartment prices remain reasonable. This is accurate, because real estate does not function like equities. Price adjustments occur with considerable lag. When new projects become unaffordable, buyers turn to older projects as alternatives.
Once resale inventory from secondary markets in established projects is absorbed, overall prices rise immediately—a common occurrence across many market segments. In equity markets, this is called a breakout.
Specifically: If all apartment prices throughout 2020–2021 are elevated and remain inflated for two years, market disruption will follow. The consequences are severe. Millions of people will be permanently priced out of homeownership.
