Apartments priced under $1,000 per square meter disappear from Vietnam market

Vietnam's real estate market is facing a dearth of projects in the affordable segment priced under VND25 million ($1,018) per square meter, but mainly in the middle and high-end segments priced from VND25-70 million ($2,850) per square meter.

In particular, apartment prices have continued to increase in big cities like Hanoi and Ho Chi Minh City, according to a housing and real estate market report by the Ministry of Construction (MoC).

The report showed that for commercial housing, in 2023, the whole country had 67 newly licensed projects with 24,993 units. There were 71 completed construction projects with 29,612 units and 197 projects eligible to sell future-formed housing.

However, the figures were all relatively lower than 2022, (126 newly licensed, 91 completed and 252 qualified for selling future-formed housing).

Despite many difficulties, the market saw improvements in the second half of 2023, reflected in the total number for transactions of apartments, private houses and land plots rising 13% year-on-year.

Deputy Minister of Construction Nguyen Van Sinh assessed that the property market showed more positive signs at the end of the year, but 2023 was still a year with many difficulties and challenges even though the government and Prime Minister directed ministries, sectors and locations to deploy tasks and solutions.

"Real estate businesses need to proactively implement a number of solutions, diversify capital sources; mobilize capital associated with specific capital use purposes; reduce financial leverage, minimize spread investment; and focus on completing unfinished projects, especially social housing, worker housing, and low-cost housing to increase liquidity," the deputy minister noted.

According to Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association (HoREA), 2023 was an extremely difficult year for the real estate market. He cited HCMC’s realty market had a year-on-year decline of 11.58% in the first half of 2023, 8.71% in the first nine months, and 6.38% for the whole year.

However, the HoREA chairman said that the real estate market is in the process of recovery. Recently, the government, ministries and agencies have come up with solutions to remove obstacles facing the market. In particular, the National Assembly has freshly passed the revised Land Law, along with the amended Housing Law and the amended Real Estate Business Law, to perfect policies and laws on management and land use, adding momentum to the property market.

Real estate businesses still in difficulties

According to the MoC, businesses in the real estate sector are still facing many difficulties. In particular, they are encountering legal problems regarding regulations on land valuation methods and land use plans.

Poor coordination between departments, agencies, and localities in site clearance, compensation, resettlement support, land recovery, and land valuation has also caused many hurdles for real estate projects, the ministry said.

“It is difficult for businesses to access credit loans, while mobilizing capital from corporate bonds and other channels is almost impossible, leading to a lack of capital to implement projects,” it added.

To overcome difficulties, many legal documents on investment, construction, planning, housing, and real estate business have been amended and supplemented. However, the MoC said that there are still some problems, especially those related to the land-related laws, procedures for land allocation, land lease, site clearance, and calculation of land use fees in many projects and localities.

Last year, credit interest rates were cut several times and the State Bank of Vietnam actively directed commercial banks to give loans to qualified real estate projects, and deploy credit packages for social housing and old apartment renovation projects, it elaborated.

However, real estate associations and businesses still complained that access to credit capital remained limited, in addition to low project implementation progress, the ministry assessed.