Vietnam property market awaits important legal frameworks as it enters ‘new cycle’

The Vietnamese real estate market is entering a “new cycle” and waiting for important legal frameworks for further development, said executives with property consultants Savills Vietnam.

Su Ngoc Khuong, senior director of investment at Savills Vietnam, said Vietnam retained significant appeal for foreign investors. "With a population rapidly approaching 100 million, residential and office demand remains high, especially in major cities like Ho Chi Minh City and Hanoi," he noted.

Despite long-term challenges including some related to legal procedures, its strong economic growth and stable political structure has kept foreign investors interested, Khuong reiterated.

The government’s sound investment support policies and support of industrial zones have been another pull factor for foreign direct investment, he said.

Khuong noted that real estate investment in Vietnam can be broadly divided into two main sections – project-level investment and enterprise-level. At the enterprise level, investors focus on listed real estate companies, he clarified.

Even with a modest 5.05% GDP growth in 2023, Vietnam was one of the strongest performers in the Southeast Asian region, which has captured the attention and interest of investors, especially during challenging periods.

However, the complexity of legal ownership of residential real estate in Vietnam has limited individual foreign investors’ engagement in the mid-end to high-end segments, Khuong said.

On the positive side, he noted that the government has responded in a timely manner to the situation of extremely limited land supply in major cities like Ho Chi Minh City and Hanoi. It has directed public investment to urban projects and infrastructure in satellite cities around the major cities.

As a result, domestic investors can now participate in larger-scale projects, Khuong said. Developers with substantial land reserves in satellite cities are ready to deploy projects and will have significant growth opportunities in 2024. They will benefit from monetary policies, preferential credit and expanded prospects for real estate business growth, he added.

Khuong also said that international developers were awaiting more relaxed legal policies to provide products society’s needs.

The way forward

Real estate is entering a new cycle. Throughout 2023, the market saw positive changes, however, challenges persist, said Do Thu Hang, senior director of advisory services, Savills Hanoi.

Since the beginning of 2023, the government has actively and continuously addressed obstacles in the market, she said.

Notable actions include the issue of Decree No. 08/2023/ND-CP; Resolution No. 33/NQ-CP; Decision No. 338/QD-TTg; Decree No. 10/2023/ND-CP; Circular No. 02/2023/TT-NHNN; Public electricity No. 1376/CD-TTg; and Public electricity No. 965/CD-TTg.

Last November, the National Assembly passed the 2023 Real Estate Business Law and the 2023 Housing Law.

Hang said the amendments proposed to the Land Law last year was a major legislative project that required careful consideration before approval.

While government policies have improved the supply of new projects and products, the situation of limited housing has persisted, she added.

In the second half of 2023, liquidity improved for several apartment projects with reputable developers, products that met quality standards were well located and had good handover quality including legal assurance, complete and convenient amenities and attractive sales policies like extended payment schedules and interest support.

However, such projects were limited. High housing prices continued to challenge liquidity. Legal concerns about the inability to complete projects when customers have fulfilled their obligations have also hindered transaction volumes, Hang said.

In 2023, real estate enterprises restructured project portfolios vigorously, improving cash flow difficulties, and reducing the burden of market filtration, which was still significant. Such restructuring processes often take time to implement, Hang said.

Several challenges remain as the market enters 2024, and these have to be addressed before recovery can occur, she added.

If the amended Land Law is passed, it will be a significant driver for real estate growth alongside the 2023 Real Estate Trading Law and 2023 Housing Law as these laws will provide long-awaited clarity on many issues, Hang said. She did not elaborate.

With the strong push for infrastructure investments, the prospects for sound economic development will increase demand for real estate across all segments, she said.

She stressed the need to address the supply-demand imbalance and offer affordable products to meet demand.

Hang added developers should reduce their dependence on bank funding by mobilizing other channels like investment cooperation and portfolio restructuring. They should also offer extended payment schedules to ease buyers’ cash flow pressures and stimulate transactions, she said.