FACTORS AFFECTING HOUSING PRICES IN VIETNAM

1. INTRODUCTION
1.1 Reasons and Problem
The industrialization, modernization, and economic growth in Vietnam are
undergoing strong development, leading to the expansion of urban areas and a growing
demand for housing. However, the average income of people in major cities has not kept
pace with the rapidly increasing housing prices. According to a representative of the
Vietnam Real Estate Brokers Association, "The real estate market has been developing
like a storm in recent years. The demand is increasing while the supply is limited due to
unresolved legal obstacles. Combined with the development of infrastructure,
transportation, and convenient roads, the land accumulates intrinsic value every day,
causing housing prices to soar at a record-breaking pace." Therefore, understanding the
factors influencing housing prices and considering the potential risks of speculative
bubbles and the affordability issue for individuals and families is crucial.
Housing price fluctuations may depend on various factors, but the most
fundamental factors to consider include the location of the property, the type of property,
or the time it takes to access amenities, etc.
Based on this issue, the research topic "Factors Affecting Housing Prices in
Vietnam" has been chosen to identify and analyze the main factors that impact house
prices. Based on this, the research provides some suggestions for more appropriate
marketing and housing development strategies, offering housing that meets the needs of
different groups of people.
1.2 Research Objectives
This study aims to identify and analyze the main factors that affect housing prices
in Vietnam. By understanding and analyzing these factors, the research provides useful
information for real estate developers and investors, helping them have a better
understanding of the factors that influence housing prices and apply appropriate
marketing and housing development strategies. Additionally, it provides useful
information for homebuyers to have a more comprehensive view of the factors that affect
housing prices, thereby making informed decisions when choosing a home that suits their
needs.

2. THEORETICAL BASIS
 Some research on the topic that the group intends to study:
Opuku & Muhmin's research (2010) has pointed out that the characteristics of
housing and related factors are among the most important influences on homebuyers'
decisions. The characteristics of housing can be considered from five aspects: Area,
Design, Construction quality, Resale potential, Legal status. Moreover, they are also
associated with factors that meet the material and psychological needs in daily life, such
as electrical systems, water supply, sanitation, temperature control, communication
information, etc. The better the quality of these amenities, the higher the cost of the
house.
"The impact of location on housing prices: applying the Artificial Neural Network
Model as an analytical tool" by Laura Fernandez-Duran and colleagues indicates that real
estate located in the city center or a specific area tends to have higher value compared to
similar properties located in peripheral areas, meaning that housing prices decrease as
they move further from the city center.
According to Tan (2012), the surrounding environmental factors such as security
issues, climate pollution, environment, social order and security, all contribute to
customer satisfaction. Housing prices in an area tend to increase when the population
density suddenly increases due to population mechanical growth (the difference between
emigration and immigration). Additionally, other factors within the area, such as the
quality of healthcare services, education, people's literacy level, security, and local
customs, also influence the price of the property.
Wen's study (2005) used the analysis method of HPM in the housing market in
Hangzhou, China, based on a survey of 290 houses, showing that floor area, decoration
level, residential floor, parking, attic floor, environment, community management,
recreational facilities, transportation conditions, and transaction time are important
criteria that significantly affect housing prices.
The research results of Bajari and Kahn (2007), using the HPM model based on
data from the housing market in Los Angeles from 2000 to 2003, showed that people are
willing to pay higher prices to avoid longer commutes. Conversely, at a lower price level,
people are willing to pay for larger land or houses.

III. RESEARCH METHOD

3.1 Economic Model:
The research topic uses the Hedonic Price Model (HPM) - a model that analyzes
the price appreciation to construct a regression function for housing prices.
The model depends on seven fundamental independent variables, including Land value,
Construction cost, Type of house, Total living area, Commute time to workplace,
Commute time to nearest healthcare facility, and Commute time to school.
Several studies have employed the Hedonic Price Model, such as:
1. Megbolugbe, Isaac F. (1989). "A Hedonic Index Model: The Housing Market of Jos,
Nigeria," Urban Studies 26, 486–494.
2. Bajic, Vladimir. (1983). "The Effects of a New Subway Line on Housing Prices in
Metropolitan Toronto," Urban Studies 147–158.
3. Selim, S. (2008). Determinants of house prices in Turkey: A hedonic regression model.
Doğuş Üniversitesi Dergisi, 9(1), 65-76.
4. Selim, H. (2009). Determinants of house prices in Turkey: Hedonic regression versus
artificial neural network. Expert Systems with Applications, 36(2), 2843–2852.
doi:10.1016/j.eswa.2008.01.044
5. Oktay, E., Karaaslan, A., Alkan, Ö., & Çelik, A. K. (2014). Determinants of housing
demand in the Erzurum province, Turkey. International Journal of Housing Markets and
Analysis.
The strength of the Hedonic Price Model (HPM) is that it is commonly used to
assess environmental services where their presence directly affects certain market prices.
In general, the price of a house (including its materials) in the Hedonic model depends on
the characteristics of the house, such as its location relative to the city center, proximity
to roads, proximity to amenities, and the value of the features within the house, such as
the living area, number of bedrooms, number of floors, etc. The objective of the model is
to determine the price dynamics of the land based on these aforementioned
characteristics.
3.2 Regression model
 Time taken to
reach the nearest
healthcare facility
Time taken to
commute to the Total living
workplace area

Housing
Time taken to prices Type of the
commute to the
house
school

Cost of
completing the Land value
house

Figure 1. Regression model

To assess the impact of independent variables on the dependent variable, this research
applies the theoretical basis and proposes a mathematical research model as follows:
gno = β + β .tgyt+ β .tglv + β .tgth + β .dto + β .ln + β .gtd + β .cpht 
0 1 2 3 4 5 6 7

- Description of variables, measurement, and units:

Table 1. Variables in the model.

Variable Description Đo lường Unit
symbol
gno Housing price Million
VND
tgyt Time taken to reach the nearest healthcare continuous Minutes
facility

tglv Time taken to commute to the workplace continuous Minutes

tgth Time taken to commute to the school continuous Minutes
dto Total living area continuous m 2
 ln Type of the main house: categorical
1 = Villa
2 = Solid and closed house
3 = Solid but not closed house
4 = Semi-solid house
5 = Temporary and others

gtd Land value continuous Million

VND
cpht Cost of completing the house continuous Million
VND

3.3 Data sources

The data for the research will be obtained from MUC2V, MUC2X, MUC3A,
MUC4A, and MUC7 in the VHLSS 2018 (Household Living Standards Survey) dataset,
which is collected through a biennial survey on the living standards of households in
Vietnam conducted by the General Statistics Office (GSO) of Vietnam. The purpose of
the survey is to systematically monitor and supervise the living standards of different
population groups in Vietnam, evaluate the implementation of comprehensive strategies
for growth, poverty reduction, and contribute to assessing the results of Millennium
Development Goals (MDGs), Sustainable Development Goals (SDGs), and Vietnam's
socio-economic development goals. The living standards survey has been organized and
implemented according to the specified plan and high-level statistical information
production procedures.

4. RESULTS
4.1 Descriptive Statistics
The results in this research were conducted using RStudio software, including 1
dependent variable (gno) and 7 independent variables (tgyt, tgth, tglv, dto, gtd, cpht, ln)
with a sample size of 20,027 observations.
Bảng 2: Descriptive Statistics
Variable Obs. Mean Std. Min Max

Dependent variable
gno Housing price (Thousand 20027 1007070.9 3113346.09 -1 80000000
VND) 7
Independent variable
tgyt Time taken to reach the 20027 21.72 13.37 0 59
nearest healthcare facility
(Minutes)
tglv Time taken to commute 20027 19.89 26.59 1 720
to the workplace
(Minutes)
tgth Time taken to commute to 20027 13.83 16.34 1 660
the school
(Minutes)
dto Total living area 20027 94.80 60.79 14 5
ln Type of the main house: 20027 3.45 0.94 1
1 = Villa 193
2 = Solid and closed house 4609
3 = Solid but not closed house 2288
4 = Semi-solid house
5 = Temporary and others 11771
1166

gtd Land value 20027 758114.67 2879092.84 -1 78000000

(Thousand VND)
cpht Cost of completing the 20027 207487.59 303535.61 -1 4000000
house
(Thousand VND)

According to the survey, the average house price is 1 billion VND, with the
highest house price reaching 80 billion VND, and the majority of house prices revolving
around the average of 3.1 billion VND. The time to travel to schools for households
ranges from a minimum of 1 minute to a maximum of 660 minutes (11 hours). The time
to travel to the nearest healthcare facility ranges from 0 to 59 minutes, with an average
travel time of around 22 minutes among the 20,027 observed samples. The average travel
time to workplaces is close to 20 minutes, however, the standard deviation of travel time
is relatively large, around 27 minutes, indicating diversity in commute times. The longest
travel time to workplaces is 720 minutes (12 hours), while the shortest travel time is 1
minute. The total residential area ranges from 14m2 to 500m2. The average land value is
758 million VND, and there are households with land values as high as 78 billion VND.
The average cost to complete a house is 207.5 million VND, with a standard deviation of
303 million VND, and the highest cost to complete a house is 4 billion VND. Among the
20,027 houses, there are 193 villas, 4,609 solid closed houses, 2,288 solid non-closed
houses, 11,771 solid for-sale houses, and 1,166 houses that are temporary or of other
types.
4.2 Bivariate Analysis
Observing the correlation between the time taken to reach the nearest healthcare
facility, the time taken to commute to the workplaces, the time taken to commute to
schools, the total living area, the land value, and the cost of completing the house in
relation to housing prices through a scatter plot.