Vietnam property market starts to accelerate: association

The Vietnamese real estate market began to record more bright spots in the third quarter of 2023, with transactions improving month-on-month and quarter-on-quarter, according to the Vietnam Association of Realtors (VARS).

Although the market does not have enough strength to "overcome the slope", it has partly escaped the risk of "losing the brakes", the association said.

The number of transactions across the market has gradually increased. In Q2, the market recorded 3,700 transactions, an increase of 37% from Q1. In Q3, the figure hit nearly 6,000, 1.5 times more than Q2 and over two times higher than Q1.

However, in the nine months, the number of new transactions was only about 50% compared to the same period in 2022 and about 20% of the figure in the period of overheated development due to a lack of social and affordable housing.

A report on the realty market in Ho Chi Minh City and its surrounding areas by Vietnamese property consultancy firm DKRA shows that in Q3, 17 projects were launched for sale, including one new project and 16 others in their next phases, with 4,542 apartments, a decrease of 17% over the same period in 2022. New sales reached 3,270 units, up 13% year-on-year and 2.8 times higher than Q2.

New supply in Q3 was 2.5 times higher than in Q2 but only 83% of the same period last year. Ho Chi Minh City accounted for nearly 90% of new supply in the entire market. In the southern economic hub, the Grade A segment made up two thirds of new supply, with projects mainly in the city's eastern area, while the Grade C segment returned after a long absence, but only accounted for about 4% of total new supply.

DKRA said that the market has recorded signs of improvement, with developers offering a range of attractive sales policies to stimulate demand such as discounts for quick payment, extension of payment deadlines, and gifts.

Prices in the primary market did not fluctuate much while secondary market liquidity recovered with prices recording a slight increase of 1-3% compared to Q2.

In HCMC, the lowest price of new projects was VND30 million ($1,222) per square meter and the highest was up to VND185.5 million ($7,560). Among localities on the outskirts of HCMC, Ba Ria-Vung Tau province saw relatively high selling prices for new projects, with the lowest being VND47.3 million ($1,927) per square meter and the highest VND51.3 million ($2,090).

Binh Duong, Dong Nai and Long An provinces maintained relatively stable prices. In Binh Duong, the lowest price was VND29.5 million ($1,200) per square meter and the highest was VND49 million ($1,996). The respective figures were VND31.1 million ($1,267) and VND34.9 million ($1,422) in Dong Nai; and VND21.3 million ($868) and VND24.4 million ($994) in Long An.

Prof. Dr. Hoang Van Cuong, vice rector of the National Economics University, held that the real estate market has seen changes compared to the end of 2022 and early 2023. Although it has not yet faced the risk of recession, its recovery remains slow without a breakthrough.

"The economy has not yet recovered, with weak purchasing power. Liquidity in different segments is still limited, while supply is low, leading to an unreasonable decrease in selling prices," he said, adding that despite many interest rate cuts and increasing credit, the market's absorption capacity is still low.

“As the economy is unable to make breakthroughs, we should not expect the real estate market to immediately have a breakthrough recovery,” he noted.

Two barriers need to be removed

According to Cuong, for the property market to recover, it is necessary to add new supplies, especially social housing and low-cost housing, to promote liquidity and transaction volume, helping businesses generate revenue to repay debts, restructure products and capital flows, balance finances, and access new loans.

"Most importantly, only when developers’ financial capacity is improved can they regain customer trust as a premise for a sustainable recovery," he said.

According to Cuong, the two biggest barriers hindering real estate businesses in the restructuring process come from capital and legality as these factors determine the formation and development of real estate projects as well as the operating process of a business, whether large or small.

The biggest legal barrier derives from approval for projects that are eligible to start construction and be put into business. Currently, real estate supply is scarce, especially in the mid-priced commercial housing segment. However, not many new projects are being started mainly because they do not meet the legal conditions due to problems in land valuation, determining financial obligations or methods, and procedures of converting land use purposes.

Regarding capital, Cuong said that real estate businesses are in need of long-term capital. However, due to the previous policy of tightening credit for real estate, in addition to old unpaid debts, many businesses cannot access bank loans. In addition, capital mobilization from bonds remains difficult as investor confidence has not recovered, he added.

Therefore, the immediate solution is to resolve legal procedures for projects that are in the process of investment preparation or ready to be launched in order to add new supply, he stressed.

Regarding long-term solutions, this expert said the current problems lie in the laws on Land, Housing, and Real Estate Business. Hopefully, by the end of this year, the National Assembly, the country's highest-level legislature body, will pass three amended laws to serve as a basis for removing legal difficulties and supporting businesses.

“All the solutions need to balance benefits and risks, while creating favorable conditions and development space for short-term and long-term growth. Above all, we need to establish a sustainable, healthy, transparent real estate market that has enough motivation to enter a new cycle," he emphasized.