Investors' wait-and-see approach, legal obstacles slow Vietnam's property market recovery: expert

Multiple factors are delaying the real estate market’s recovery, with the "wait-and-see" mentality of investors being a significant impediment, says Vo Hong Thang, director of consulting & project development at DKRA Group.

Moreover, the persistent challenges in project approvals continue to pressure businesses and constrain new supply from entering the market, he added.

Thang cited data from the Ho Chi Minh City Department of Construction as showing that in the first 11 months of 2024, the city approved only 12 new housing projects. Additionally, no land was allocated or leased for new residential developments, and only two commercial housing projects were granted construction permits.

Legal bottlenecks have particularly been seen at projects involving "land in-between" (land originally designated for public use but now incorporated into real estate developments). Currently, there are approximately 126 projects in HCMC facing delays in their legal processes and construction timelines due to such land-related issues.

Thang also pointed out that although these issues are featured in the government’s Decree 148/2020 and more recently in the 2024 Land Law, they remain unresolved.

The challenge of calculating land use fees, which accounts for 60-70% of legal challenges faced by projects, continues to be a major stumbling block for developers across the country.

Although the revised Land Law, Housing Law, and Real Estate Business Law were approved, there is still a need for additional guiding circulars and decrees to ensure their effective implementation.

Notably, many real estate companies are struggling with financing, particularly those with high bond debt. Statistics show that the total value of corporate bonds maturing in the market is projected to exceed VND300 trillion (around $12 billion) in 2024, with more than VND130 trillion of that coming from the real estate sector alone.

"This is a massive amount in the current market, where liquidity remains very tight. At the same time, delays in project legalities make it difficult for businesses to access new bank loans," Thang said.

According the Ho Chi Minh City Real Estate Association (HoREA), between 2015 and 2023, HCMC approved 138 real estate projects. However, only 52 of them were launched, providing 35,556 apartments and 6,081 low-rise houses.

Among the remaining 86 projects, 30 were halted, leaving 21,676 units across more than 210 hectares in limbo. The other 56 projects have yet to break ground, covering 754 hectares and containing an additional 32,375 units.

As a result, unsold inventory in the city has accumulated to over 54,000 units, including 46,986 apartments and 7,065 low-rise houses. These properties are scattered across various districts, including central areas like the 330-hectare Tan Tao Residential Area in Binh Tan district, which is still undergoing land clearance.

HoREA chairman Le Hoang Chau held that the delays in clearing inventory not only waste valuable land resources but also create an imbalance between supply and demand - too many high-end properties and a shortage of affordable housing.

This, he argued, is a key reason why housing prices have continuously risen in recent years, far beyond the reach of middle- and low-income buyers.

Another factor contributing to the slow recovery is legal entanglements in land and real estate regulations. Although significant legal amendments were made in 2024, it will take time for these changes to be fully realized on the ground.

Additionally, Chau pointed out that the investment and construction process for real estate projects is still mired in complex approval procedures. Currently, many large property projects in HCMC are either under inspection or have not yet received full permits to proceed.

"In the past two years, 64 real estate projects from 57 companies in HCMC have encountered prolonged legal difficulties. As of July 2023, nine of them have had their issues resolved, but the rest are still awaiting further consideration," he said.

The looming pressure of bond maturities is also creating challenges for real estate companies. It is estimated that the sector will face bond repayments totaling about VND180 trillion ($7.07 billion) by 2025.

"Although there are still many challenges, the HCMC property market has shown positive signs of recovery, with a 9% growth rate and total revenue reaching VND418.11 trillion ($16.43 billion) this year, of which more than 60% came from trading of real estate. The city also generated over VND17 trillion ($668 million) from land sales, a 12% increase from 2023," Chau commented.

However, he added that when compared to Hanoi’s projected land-related revenue of nearly VND48.6 trillion, the recovery of the HCMC market is still lagging behind.