Despite facing many risks and challenges, the Vietnamese real estate market still has the foundations and bases for recovery. Because from the end of this year and the following months in 2024, the market will continue to need "support" from the mechanisms and policies of the Government, ministries and branches in completing the framework, removing legal obstacles, creating positive momentum for the recovery process.
Nationwide, there are up to 1,200 projects waiting to be resolved, but only about 500 projects are being considered. (Photo: MP)
In recent years, the real estate market has developed at a very fast pace, partly due to the huge investment demand. However, up to now, this market is "cooling down" due to being pushed up too high, legal problems... causing investor confidence to stagnate. A clear proof is that the whole country has up to 1,200 projects waiting to be resolved, but only about 500 projects are being considered, meaning that there are over 800 projects continuing to... wait!
According to Mr. Nguyen Quoc Hiep - Chairman of GP Invest, in reality, 70-80% of enterprises' problems are related to legal issues and administrative procedures. Therefore, enterprises are looking forward to the legal aspects that the National Assembly is considering passing. For example, site clearance, procedures and recovery mechanisms are prolonged... some projects have not completed this work in 15 years. Regarding investment procedures, currently, a project must request more than 30 seals. This erodes the health of enterprises.
Sharing this view, Mr. Nguyen Van Dinh, Chairman of the Vietnam Real Estate Brokers Association, commented that, however, the current difficulties of the real estate market also lie in the real estate market itself and real estate businesses are having many problems. Statistics from the functional units of the State Bank and the Ministry of Construction show that apartments priced under 25 million VND/m2 are very few, almost absent. Currently, the market is in a state of great imbalance between supply and demand, the main supply is the high-end and mid-range segments. The low-end segment serving low-income people is still limited.
At the recent online conference to implement the Prime Minister's Official Dispatch 993/CD-Ttg, Mr. Dao Minh Tu, Deputy Governor of the State Bank, said that recently, housing prices have decreased very slowly, even increased, while lending interest rates have decreased. Real estate businesses need to be unified in the "game" of housing prices. Currently, housing prices are very high, businesses must consider to be able to solve the problem of market purchasing power.
Citing data from Ho Chi Minh City, from 2020 to present, high-end housing has always accounted for an overwhelming proportion of up to 70-80% of products on the market, the rest is the mid-range segment. In the past 3 years, the city no longer has affordable housing priced under 25 million VND per square meter, while this segment accounted for more than 44% in 2017. Meanwhile, housing prices have continued to increase since 2017, surpassing the financial capacity of people with low-middle income. Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), commented that if people with low-middle income save 100 million VND per year, it will take about 25 years to be able to buy an affordable apartment priced at 2-3 billion VND. With social housing, if the policy does not change, people paying personal income tax level 1 (regulated under 60 million VND per year) will not be able to buy, while affordable commercial housing is beyond reach.
State Bank Governor Nguyen Thi Hong said that project transparency and pricing are important issues to stimulate real estate investment demand to increase again. Enterprises and corporations themselves also need to follow the direction of the Government in Resolution No. 33, which is to have good corporate governance, balance profit targets, product structure, consider reducing selling prices... Then, along with solutions from ministries, branches and localities, it will encourage investment demand in this market.
With a series of positive signals recorded in recent times, many experts believe that the real estate market has passed the bottom and entered a new cycle, followed by the demand for human resources of brokerage companies, real estate agents... The real estate market has begun to be vibrant with a sharp increase in transactions since the third quarter of 2023, with customers actively returning to the market during sales events of projects. According to a recent report by the Vietnam Association of Realtors (VARS), the first sign that the market is entering a new phase is increased liquidity. Specifically, in the second quarter of 2023, the market recorded 3,700 transactions, an increase of 37% compared to 2,700 in the first quarter. By the third quarter, the market had recorded nearly 6,000 transactions, 1.5 times higher than the second quarter of 2023.
According to VARS, newly launched projects across the country have recently received the attention of many investors. Some projects in potential areas have also recorded a sudden increase in bookings. Many people have also "paid" for townhouses, villas, and commercial real estate products over 5 billion VND.
In fact, the real estate market in the fourth quarter of 2023 will recover with transaction results clearly improved compared to the previous three quarters thanks to the strengthening of investor confidence, lower interest rates, and more suitable supply sources in the market. Thanks to the clear recovery of the real estate market in recent months, the job market related to this field has also become vibrant again. The growth of the real estate market also comes from the interest rate factor. Currently, savings interest rates at banks are falling sharply, in some places only 3-5%/year. This is the motivation for people with accumulated money to switch to a more attractive investment channel such as real estate when in fact the preferential loan interest rate to buy real estate on average in the first year is fluctuating around 7-9%/year.
Many experts predict that the time for real estate to improve more clearly is after the second quarter of 2024. When bank interest rates decrease, it will have a clear impact on the market. From now until early 2024, lowering operating interest rates will be difficult. The reason is not inflation, but the fundamental problem is exchange rate pressure. If the exchange rate increases too much, not only cash flow but also businesses themselves will be in great difficulty. We still have to accept the depreciation of VND, but it cannot be too high.
Assessing the market's growth potential, HoREA said that signs of recovery will be clear from the second half of 2024 onwards. Because the biggest legal issues and obstacles are being resolved by state agencies through draft amendments including the Housing Law, the Real Estate Business Law, etc. Hundreds of projects are also being resolved, along with investors restructuring, restructuring products and reducing housing prices, which will help the market have prospects for recovery. Although the real estate market is still facing many difficulties, there is every basis to affirm the prospect of recovery and continued growth in a safe, healthy and sustainable development direction from the following drivers: The National Assembly is considering the draft Law on Housing (amended), the draft Law on Real Estate Business (amended), the draft Law on Credit Institutions (amended), the draft Law on Property Auction (amended)... which, if enacted, will ensure consistency, unity and feasibility, and be close to reality. Moreover, the real demand for housing is still very large, especially affordable housing, social housing...
I think the new market cycle will have very different factors because the current trend is to focus on developing real values, meeting the real needs of customers, contributing significantly to the market's recovery.
However, as economic expert Vo Tri Thanh commented, the Government is having solutions, including the Ministry of Construction amending some contents in decrees and circulars. Only when the law is clear can banks "put money in". The real estate market has many foundations for recovery but is also facing many risks and challenges. From the end of this year and the following months of 2024, the market will continue to need "support" from mechanisms and policies of the Government, ministries and branches, creating positive momentum for the recovery process.
Communist Party of Vietnam
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