Vietnam real estate recovery can begin next year: proptech exec

Vietnamese authorities are trying to help the real estate market recover. The central bank has cut interest rates four times this year. Ministries, agencies and localities have been tasked with disbursing VND711 trillion ($29.9 billion) in public investment in the second half of 2023. The Ministry of Construction has been asked to intervene directly to solve the problems of some major projects. How do you think these moves will play out?

These actions can help provide more capital and lift hurdles for investors. They will have a strong impact on home buyers because 85%-90% of transactions are on the secondary market, where properties are traded after they are put for sale on the primary market. The lower interest rates will directly help home buyers access loans with better conditions.

However, it will take longer for major realty projects to recover because they still require solutions related to both capital and the legal framework. Besides, buyers' sentiments are needed for a recovery to happen. Lifting hurdles related to capital and regulations can help boost sentiment. However, more patience will be needed for sentiment to be restored in projects facing legal issues.

When do you expect the market to start recovering?

In the basic scenario, it will take between four and six quarters for initiatives to kick in positive impacts and help market recovery. Those changes, regarding interest rates, credit growth, and policy adjustments, were initiated in the first quarter of this year, so the recovery can begin next year. However, this assumption is based on previous market developments. Additional factors related to the current market may lead to different results.

To facilitate market recovery, house buyers can make preparations by equipping themselves with relevant information and knowledge to the maximum extent. This can help sustainable development of the market. Of course, sustainable development requires joint efforts from sellers, realtors and regulators.

It is obvious that house buyers complete their plans long before they make their purchases. Our survey found that 61% of respondents plan to purchase houses this year. This means property is still considered a major asset by many people. Personally, I think there is always a huge demand for houses, but there are many other key factors to consider, like prices, infrastructure and legality.

You said sentiments play a key role in realty market development and that 61% of survey respondents plan to buy houses in the next one year. How will the other factors come into play?

The demand for property purchase is ever-present as population grows and primary market supply is limited. Property remains an ideal investment option for the long term. To further boost the market, more support related to capital, the legal framework and infrastructure is imperative.

Regarding capital, the key is access to capital at a feasible cost. As real estate transactions based on loans account for one-third of the total, improvements in the legal framework and supporting policies for easier loans will boost the market. The central bank's four rate cuts will definitely help reduce interest rates in the medium and long terms, but short-term impact is unlikely.

For the legal framework, many draft law amendments are under consideration covering site clearance and land compensation per market prices. These changes will improve market transparency and provide buyers with greater insights to make better decisions.

Speaking of infrastructure, the country is pushing public investment, especially in constructing the North-South Expressway, ring roads around Hanoi and Ho Chi Minh City, Long Thanh International Airport in Dong Nai province and so on. Such investments will raise the value of properties and boost people's sentiments, eventually uplifting the market.

Singapore-headquartered PropertyGuru recorded revenues of SGD3.33 million ($2.5 million) from the Vietnamese market in the first quarter of this year, down 34.2% year-on-year, according to a company report on quarterly financial results released in May.

“Vietnam remains the primary challenge in the near-term, as governmental monetary policy has significantly impacted real estate transaction activity. We believe that these pressures will begin to abate in the latter part of 2023 and into 2024,” said Hari Krishnan, CEO and managing director of PropertyGuru.