Vietnam’s different real estate segments face different challenges

Even as the Vietnamese real estate market gradually recovers after an unprecedented difficult period, each segment continues to face its own unique challenges, experts say.

While the commercial housing segment continues to encounter a supply-demand imbalance and rising prices, industrial real estate remains strong but faces challenges regarding the demand for "greening" industrial parks, said Le Dinh Chung, a member of the Vietnam Association of Realtors' (VARS) market research working group and CEO of Hanoi-based developer SGO Homes.

He noted that the industrial real estate segment continued to “maintain its heat" with strong growth in new projects and an increasing influx of foreign direct investment (FDI). The occupancy rate of operational industrial parks in the country remained stable at around 75%. Notably, the rate was 82% in key northern provinces and 92% in key southern ones.

That said, it was difficult to increase occupancy rate at established industrial parks because supply and demand do not meet, he said.

Elaborating, he said IP developers would only invest in infrastructure when they had investors; while the investors preferred to invest in projects with existing infrastructure.

"The challenges for this segment also arise from the demand for greening industrial parks, which must meet the growing expectations of investors and the country’s sustainable development goals," he said.

In the commercial real estate segment, Chung held that both office and retail segments continued to grow, driven by increasing demand.

“Modern, high-end offices that meet green certification and sustainable development standards continue to attract tenants, especially foreign businesses. New shopping centers that integrate various activities also remain attractive.

"Old office buildings and shopping centers, along with small retail spaces in prime locations, are seeing increasing vacancy rates," he said.

Meanwhile, the resort real estate segment continued to struggle, Chung noted. In the third quarter of 2024, the Vietnamese tourism and resort real estate market recorded about 945 new products, just 35% of the previous quarter and about the same year-on-year.

"This decline was mainly due to Q2 new supply coming from just one large project. In total, for the first nine months, this segment saw 4,059 new products, up 80% year-on-year, but only 25% of the level in the same period in 2022," he said.

The apartment segment was grappling with a significant imbalance between supply and demand, leading to rising prices, he said. Citing a VARS report, Chung noted that in the first nine months, the entire market saw 38,797 new products, dominated by those offered at above VND50 million ($2,000) per square meter. The supply mainly came from high-end and luxury segments, while affordable apartments were almost completely absent.

Other experts have said that with improvements in the legal framework and public investment, developers will continue to push projects forward, potentially "heating up" the market in the final months of the year. With the expected boost in housing supply, some momentum will be created through mergers and acquisitions.

They’ve also said that almost all segments will continue to stay on the recovery path. High-end apartments will dominate the market, villas and townhouses will see bustling transactions, land plots with full legal status will attract investors, and social housing will have more opportunities thanks to new regulations. Industrial real estate will maintain its growth, while resort real estate may improve as condotels receive ownership certificates.

The government has said it will continue to strengthen market supervision to ensure stability and proper development.

Meanwhile, the ongoing trend towards green real estate is expected to lead the market in the new cycle, some experts have said.