Many real estate businesses went bankrupt, were dissolved or downsized their operations in 2023. Therefore, 2024 is forecast to be the year of changes that may lead to a new real estate cycle, writes Vo Hong Thang, deputy director of research and development at DKRA Vietnam.
Expectations for 2024
As of the end of 2023, the Vietnamese real estate market had experienced nearly three years of countless difficulties and challenges, particularly weaker supply and demand, and it is generally believed that the gloomy outlook is likely to continue into 2024.
In the short term, the market is unlikely to see positive changes, but will continue to test investors, buyers and all stakeholders in the real estate market instead. The main reason is that policies and efforts to remove legal hurdles need time to fully exert their influence. Therefore, new supply is expected to be limited.
Prolonged project implementation results in increased financial costs and erodes profits of real estate developers and businesses. Although listed primary selling prices may not fluctuate much, developers will make “discounts” indirectly through policies for the grace period of home loans or interest reductions, by prolonging the payment schedule, or offering bold discounts of up to 15-20% for buyers who pay ahead of schedule.
In the secondary market, there will be likely sellers who reduce contract values by 10-20% or even more than 30%. Most of these transactions will be seen when buyers are highly leveraged, borrowing up to 70-80% of the value of the properties from banks, and struggle with cash flows after the grace period ends. This is mostly observed in urban projects that have a huge number of apartments and are located relatively far from the city center.
This year-end is expected to be the beginning of the next growth cycle of the real estate market. Residential segments are expected to lead the market's recovery, especially in projects in central business districts of major cities or neighboring areas with well-connected traffic infrastructure, a high density population, and elevated housing demand. Typically, the apartment segment in Ho Chi Minh City and neighboring provinces (Binh Duong, Dong Nai, Ba Ria - Vung Tau, Long An, Tay Ninh) is forecast to see clearer improvements in apartment supply in 2024, with an estimated 12,000 units.
Other notable drivers for the real estate market in 2024 will be the effect of efforts to remove legal obstacles, speedier disbursement of public investment, and a continued downward trend of loan and deposit interest rates.
Those factors will lead to increased new supply with a focus on the affordable housing segment, with prices ranging from VND40 million ($1,637) to VND50 million ($2,047) per square meter. Supply of social housing to serve real housing needs is also expected to increase thanks to the rollout of a credit support package worth VND120 trillion ($4.91 billion).
Legal standardization in the new cycle
Project legality is one of the major bottlenecks in the real estate market in general and future-formed housing in particular. Legality related issues currently account for 70% of problems faced by projects. Statistics from the Ministry of Construction show that about 400 projects in Hanoi and Ho Chi Minh City alone have encountered problems with implementation procedures that have lasted for many years without being dealt with radically.
That problem leads to another. Many real estate businesses have been willing to circumvent regulations by launching their projects for sale without full legality, posing potential risks for both buyers and the businesses themselves.
In the time ahead, following the passage of the amended Law on Housing and the amended Law on Real Estate Business, accompanied by the synchronous implementation of policies designed to remove obstacles, project legality will no longer be a "necessary condition" but will gradually become a "sufficient condition", a prerequisite for a marketable project. Consequently, it will help improve market transparency and reduce the number of suspensive projects and violations, helping to better protect the interests of homebuyers.
A proptech boom expected for 2024
The trend of technologization has gradually become an indispensable assistant of the real estate market in general and the real estate brokerage industry in particular. The fact that Vietnam has nearly 78 million internet users, or more than 79% of its population, gives the country an advantage to embark on a stronger and more comprehensive transformation wave than ever.
Some very convincing benefits of proptech (property technology) application include optimization of the efficiency of the operating, management and sales costs of a company; higher effectiveness of reaching out to customers through websites, social networks, and email marketing, helping brokers gain access to more potential customers, thereby increasing the chance of closing deals.
Improved market analysis efficiency through data analysis tools helps brokers as well as customers grasp market trends, thereby making more effective investment decisions.
Another benefit is promoting sales and customer care activities thanks to tools such as CRM (customer relationship management), which help brokers manage customers more effectively, thereby improving experience and increasing customer satisfaction.
Notably, when most people tend to search for information by video, voice, and images instead of reading text as they do today, the use of multimedia platforms to promote real estate news and enhance online interaction with customers is also considered a solution to help bring efficiency in sales.
Application of artificial intelligence (AI) and Big Data helps brokers synthesize and analyze customer data quickly (regarding customers’ habits, needs, behaviors, and preferences in each area), thereby helping to easily reach the right customers and promptly devising appropriate business strategies for each specific period.
In addition, a number of new technologies being developed and applied in real estate brokerage such as augmented reality technology (AR)/virtual reality (VR)/360 virtual reality tours also help customers quickly capture real estate product's information through images and practical experiences. Therefore, they may make a buying decision quickly.
2024 will be the year of screening and resolving ongoing problems in the market to prepare for a new growth cycle of the real estate market in a more sustainable, safe, and transparent manner.