Real estate market: Still "creeping" and "cautiously" recovering

Slow recovery

Mr. Hoang Hai - Director of the Department of Housing and Real Estate Market Management, Ministry of Construction said that the real estate sector in Vietnam has faced many difficulties from mid-2022 until now.

Specifically, the decrease in supply has caused real estate, housing, and land prices to start increasing since the beginning of 2021. By the end of the year, apartment prices had increased by an average of about 5-7%; prices of individual houses in the project increased by 15-20%; and land prices increased by 20-30% compared to the end of 2020.

The most typical example is that apartments are continuously setting new price milestones due to the decrease in the number of apartments put on the market. Apartments in affordable apartments are priced at 25-30 million VND/m2 - 30 million VND/m2, mid-range apartments are priced at 30-50 million VND/m2, luxury apartments are priced at over 50 million VND/m2, starting to exceed the investment capacity of the corresponding classes of people.

The real estate market is still slowly recovering. Image 1

According to Mr. Hai, in recent times, the Prime Minister has taken many drastic actions to remove difficulties for the real estate sector. The most prominent of which is Resolution 33, which has basically had initial results, many difficulties related to laws and institutions have been removed.

However, through working with localities and businesses, Mr. Hai assessed that there are currently many housing and urban area projects being implemented that are facing difficulties, obstacles or have stopped implementation due to many reasons, typically reasons related to land laws.

Currently, many projects are facing difficulties, obstacles, and slow implementation due to regulations on land valuation methods. The reasons are related to the law on planning, the authority to partially adjust the general planning; the conditions and time for reviewing, updating, and adjusting the planning to ensure consistency in construction planning including general planning, zoning planning, or reasons related to the law on investment.

Agreeing with this view, Mr. Nguyen Van Dinh - Chairman of the Real Estate Brokerage Association acknowledged that currently, the real estate market is facing a shortage of social housing and low-cost commercial housing.

Despite strong market demand, there has been a decline in trading activity as investors are facing capital-locking issues and dealing with financial challenges.

In the period of 2022 - 2023, the volume of real estate transactions has decreased by 90%, showing the weak demand of the market. In addition to the problem of scarcity of affordable housing supply, there are also some problems such as lack of mechanism and determination of many localities, leading to the situation that many projects have not been resolved, real estate businesses still have to face many difficulties.

Mr. Dinh said that the efforts of the Government and relevant ministries in issuing many policies to remove difficulties in the real estate market have had a positive impact on the market.

According to Mr. Dinh, in the first quarter of 2023, there were nearly 3,000 products traded and in the second quarter, this number increased by 30%. Up to now, investor confidence has gradually recovered, many new projects have started to open for sale on the market, leading to an increase in the number of real estate transactions.

However, improvements in new housing supply and buyer sentiment are still slow, requiring time to complete new projects.

At the same time, investor sentiment, although gradually stabilizing, is still quite cautious, especially those facing financial pressure from previous investments.

According to the survey, 70% of enterprises said that capital policies have not yet been truly effective. Of which, 2/3 of enterprises said that local authorities where they have business contracts have begun to disseminate and guide policy support organizations, but only 15% of enterprises assessed that land support policies, including site clearance and land use rights, have achieved effectiveness...; 28% assessed the implementation of preferential loan access programs...

Dr. Nguyen Van Dinh expects that in the period of late 2023 - early 2024, the real estate market will record more positive signs than in the late second quarter and early third quarter of 2024.

Many difficulties in the recovery process

Dr. Le Xuan Nghia - member of the National Financial and Monetary Policy Advisory Council, believes that real estate is a long-term essential product, so when supply and demand are out of balance, a crisis will occur.

According to Mr. Nghia, the Vietnamese real estate market has experienced crises many times. In the past, the crisis was oversupply, while this time it was a crisis of undersupply. In that context, businesses lacked capital and could not open more projects, so the market "frozen".

“ We are watching to see if market confidence recovers when real estate corporations and businesses issue bonds. Most recently, the largest real estate corporation in the country issued bonds without any outstanding bank debt. We are holding our breath to watch, but the results show that the market is only “creeping” and “cautiously” recovering about 30% compared to expectations, ” said Dr. Le Xuan Nghia.

According to Mr. Nghia, the real estate market may face difficulties until the second and third quarters of next year. To recover the real estate market, the Government is working hard with the Working Groups on removing difficulties in the real estate market with the participation of businesses. This is an unprecedented effort, but the results are not high.

Meanwhile, Associate Professor Dr. Tran Dinh Thien - member of the Prime Minister's Economic Advisory Group, proposed key solutions. Specifically, the next phase needs to focus on restoring the confidence of investors, businesses and consumers.

The recovery process of Vietnam's economy is showing positive signs, however, the private enterprise sector in general and enterprises operating in the real estate sector in particular are still facing many difficulties.

To solve the current problems, Associate Professor Dr. Tran Dinh Thien said that the State needs to launch stronger support to revive the real estate market. In addition, to promote the development of this market, both supply and demand sides, there should be loan guarantee funds. The Ministry of Finance needs to have measures to ensure safety and reduce the burden on the banking system.

Currently, the Government has issued a series of solutions to remove difficulties for businesses and is focusing wholeheartedly on businesses. However, the confidence of businesses and investors has not yet fully recovered, it is necessary to continue to identify difficult situations and unusual situations to have "unusual" approaches and solutions.

Besides, business associations need to continue to raise their voices to help state agencies quickly identify difficulties, thereby having timely policies and measures to resolve them.

Dinh Tran

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