The Vietnamese realty market will continue to face difficulties from credit restrictions in 2023 but warm up in the last four months of the year, analysts said.
End of 2022 likely market bottom
Assessing the real estate market in 2022, the director of a real estate business in Ho Chi Minh City, who declined to be named, said it became warmer in November and December after the government stabilized the macroeconomic situation. Particularly in the last month of the year, with the State Bank’s decision to raise the credit growth cap for banks by 1.5-2 percentage points, customers began to pay attention to real estate again.
“With the current lending interest rates of 11-12%, real estate or other investment channels will turn out bigger profit than bank deposits,” he said, noting that as property contributes greatly to the country's GDP, if the market becomes frozen, it will certainly affect hundreds of other industries and the economy as a whole.
Regarding market opportunities next year, he predicted that if the credit situation is positive, the segments of land plots worth below VND1.5 billion ($63,600) and apartments from VND2 billion ($84,800) will thrive. In particular, 2023 will be the year of segments that meet real demand.
Social housing in 2023 and beyond will also develop as prices become affordable. In addition, when the interest rate increases, social housing buyers will still enjoy loans with preferential interest rates of 4-5% for decades, said the director.
He also forecast the high-end housing segment will face difficulties in the next few years. In general, real estate businesses will continue to face challenges in terms of cash flow and personnel.
Nguyen Quoc Anh, deputy general director of Batdongsan.com.vn, said credit growth and policies will be the two factors positively impacting the real estate market.
“If a loosened credit policy is applied in early 2023, the market will have many opportunities for a quick recovery,” he said. According to Anh, at the end of 2022, the market received good news as the government set up a working group to remove obstacles for real estate and the revised Land Law is about to be passed by the National Assembly.
“With the positive prospects of credit growth and policies, we can expect an earlier recovery of the property market at the end of 2023,” he said.
Meanwhile, Nguyen Van Dinh, chairman of the Vietnam Association of Real Estate Brokers (VARS), put forth two scenarios for the market in 2023. The positive scenario is that after the Lunar New Year holiday in January, the government would launch some policy adjustments and the market will gradually warm up and stabilize until the end of the year. In the second, the market will still face difficulties due to capital flow congestion.
"To adapt to the situation, real estate businesses will actively restructure products in their ongoing projects toward better meeting market needs and develop more affordable real estate products in new projects, thus improving the liquidity", he said, believing that the market would follow the positive scenario next year.
Solutions to revive market
According to the Ho Chi Minh City Real Estate Association (HoREA), the real estate market is now in a very difficult situation, with a sharp fall in purchasing power and liquidity, a lack of cash flow and housing supply, an unreasonable housing product structure, and prices going beyond the financial ability of the majority of people.
In addition, real estate and housing projects also encounter a lot of legal problems. Without timely and effective solutions, the market may slide into recession, adversely affecting the goal of maintaining macroeconomic stability and social security.
Real estate developers have employed solutions to survive and wait for new business and investment opportunities, like stopping or suspending investment activities, construction of a number of projects; canceling the implementation of new projects, the issuance of shares to increase capital, initial public offerings and bond redemption. This would reduce state budget revenue, thus affecting the recovery and growth of the economy.
A number of businesses have also had to cut down workforce and wages, affecting the lives of many workers, construction workers, and brokers, especially with the Lunar New Year holiday approaching.
To solve difficulties in the real estate market, Dinh said that the Prime Minister's working groups should propose a number of specific mechanisms to facilitate the implementation of urgent projects and the conversion of high-end commercial projects into those suitable for the majority of people. “It is necessary to prioritize capital sources for these projects,” he noted.
In addition, the government needs to speed up the process of amending legal regulations, focusing on really removing existing bottlenecks. Project developers should actively follow market demand to develop product policies suited to market needs.
Meanwhile, Anh stressed the urgent need for real estate businesses to improve their credit rating because this will support them when the market returns to an uptrend. It is necessary to make the bond issuance channel transparent and ensure debt repayment ability.
In order to increase transactions, companies need to offer attractive financial options for buyers as well as speed up legal and project progresses to get more capital from customer prepayments, he said.
“They must diversify capital sources and actively explore recovery programs, especially those benefiting social and worker housing projects," he added.