Real housing demand lends stability to Vietnam property market: Indochina Capital exec

Vietnam’s real estate market is showing signs of sustainability and stability with strong demand for homes from people with real needs, says Michael Piro, CEO of Indochina Capital.

Piro was speaking in Hanoi on Monday at the signing ceremony for a strategic cooperation agreement that the investment fund signed with property developer HDMon Group.

Piro said scarce supply had pushed up housing prices significantly of late.

Apartment prices in Hanoi have surged continuously over the last 12 quarters, establishing a new average level of VND65 million ($2,640) per square meter.

Meanwhile, new supply in Q2/2024 dropped by 25% year-on-year and by 34% quarter-on-quarter.

"Sustained low interest rates, along with reduced supply, have led to significant price increases for apartments," Piro said.

Despite high prices, transaction volumes have surged, with absorption rates reaching nearly 70% in Q2. The number of apartments sold in the first half of 2024 already surpassed the count for the whole of 2023. Sales in Q1 and Q2 this year hit the highest levels in the past 14 quarters.

Low interest rates were a major factor propelling the real estate market, he said, noting that they were nearly at historical lows.

Home loans become attractive when people can borrow up to 80% of the apartment value, with terms ranging from 30 to 35 years. The interest rate on such loans is fixed at 6% for the first year or 6-7% for the first two years and floating thereafter.

Genuine homebuyers

Piro stressed that the in the coming time, demand from genuine buyers is expected to drive the market.

For many years now, deposits on homes were mostly made for speculative purposes, which made for significant market volatility. However, of late, demand for homes has been coming from individuals with real needs, which was crucial for ensuring a stable market.

Indochina Capital has estimated that Hanoi alone needs 75,000 apartments annually to meet housing needs.

Another factor behind rising housing demand was the trend of purchasing homes for rental purposes, Piro said. The serviced apartment market in Vietnam has been stable with high occupancy rates and attractive rentals.

With 9,000 foreign professionals granted new work permits so far this year and registered foreign direct investment (FDI) reaching $15.2 billion in the first half of 2024, up 13.1% year-on-year, the demand for housing among foreigners in Vietnam is substantial. This has attracted investment in rental properties, particularly those that meet international standards.

Piro noted further that laws enacted in August would benefit homebuyers by relaxing ownership and real estate business regulations for overseas Vietnamese, mandating bank transactions to enhance transparency, limiting individual real estate investors to no more than 10 transactions per year and capping deposits at 5% to protect homebuyers.

Lastly, there has been a rising trend of developing projects linked to public transportation. With the government prioritizing infrastructure development, developers have spotted an opportunity in transit-oriented development projects that would meet and spur housing demand in major cities and their suburbs.