The Vietnamese real estate market has overcome its most difficult period and is bouncing back thanks to fiscal and monetary loosening that has yielded positive effects, according to a leading economist.
The local property market is not in a real crisis, but a confidence crunch, said Can Van Luc, chief economist at Hanoi-based BIDV bank, at a forum hosted by the Vietnam National Real Estate Association on Thursday.
Luc, also a member of the National Fiscal and Monetary Policy Advisory Council, noted that the Vietnamese property market has been in a slump over the past year, but has recovered 20-30% in comparison to its heyday in 2021.
He pointed out the factors behind this recovery. They include an economic rebound in Vietnam and worldwide, easing inflation, lowering interest rates following the central bank’s four consecutive cuts, the gradual removal of legal troubles, accelerated public investment, and incentives adopted by the government to support businesses.
Real estate companies are bearing lighter financial burden while property prices have corrected to more accessible levels, Luc added. Credit for the sector has expanded around 5% in the year to date, slightly below the overall growth of the banking system. In addition, inbound foreign investment in real estate totaled nearly $2 billion, or 10% of FDI commitments from the beginning of this year.
Forecasts by international institutions put Vietnam’s economic growth at 5-5.5% for this year and 6.5% next year. Inflation is no longer a concern in Vietnam as it is likely to be tamed at 4% both in 2023 and 2024.
Collaborating with Luc, Nguyen Van Dinh, chairman of the Vietnam Association of Realtors (VARS), said that Vietnam’s realty market is seeing brighter prospects.
In the second quarter, a number of developers recorded better sales with around 3,700 successful transactions, more than three times the figure in early 2023.
Dinh cited VARS data as showing that there were over 5,000 transactions in July and August, which included the “bad luck” month, with 70% of them recorded in the condo segment. Supply is increasing from some 300 projects across the country and developers are offering products at lower prices.
“Unlike the freeze developers experienced at the start of this year, confidence among both developers and investors is improving,” Dinh added.
Sharing the same view, economist Dinh Trong Thinh forecast a clearer recovery in Q1 and at the beginning of Q2 in 2024 when affordable supply rises thanks to developers’ efforts to boost sales at viable projects.
The government’s scheme to build over one million low-end homes is providing support for the market, with over 400 affordable housing projects kicking off since late 2022, Thinh said.
A report by the Real Estate Research Institute has forecast a V-shaped recovery of the local real estate market from Q2/2024. Condo supply is expected to increase 20-25% annually in the 2024-2026 period. The supply of this segment in Hanoi and Ho Chi Minh City, the two largest cities in the country, is estimated to increase to 70,000-85,000 a year in the same period.