Has the real estate market reached the final stages of recession?

On the afternoon of October 3, the Dat Xanh Services Institute of Economic - Financial - Real Estate Research (DXS - FERI) held an event to announce the "Research on Vietnam's Real Estate Market in the third quarter and 9 months of 2023", thereby commenting that the real estate market has overcome the most difficult period.

7 "golden" events to help "heat up" the real estate market

Citing information in the DXS - FERI Research, Mr. Luu Quang Tien - Deputy Director of FERI said that 7 notable events taking place during the first 9 months of the year had a direct impact on the real estate market.

First, the State Bank lowered the operating interest rate four times in a row from March 2023, bringing the rediscount rate to 3.5% and the refinancing rate to 4.5%.

Second, real estate loan interest rates have cooled down, with many banks offering preferential loans from 7.5% - 8.5% and floating interest rates from 11% - 12%.

Third, the budget for public investment in 2023 is 700,000 billion VND. By the end of the third quarter of 2023, the disbursed public investment capital was recorded at about 363,310 billion VND, reaching 51.38% of the plan.

Real Estate - Has the real estate market reached the final stage of the recession? — The State Bank's interest rate reduction is one of the important moves that directly impacts real estate development.

Fourth, Circular 06 was issued to allow individuals and organizations in need of loans to repay old loans at other banks in advance.

Fifth, Decree 10 was issued to amend and supplement a number of articles of the Decrees guiding the implementation of the Land Law. Along with that, the Condotel/officetel real estate type can be granted red books, hoping to remove legal bottlenecks for many years.

Sixth, the State Bank has withdrawn nearly VND90,000 billion from the banking system through the treasury bill channel. Thereby, it has helped reduce pressure on the exchange rate, not disrupting liquidity for the entire economy, ensuring that the real interest rate of the economy continues to maintain a downward trend.

And finally, FERI believes that the US and Vietnam upgrading their relationship to a comprehensive strategic partnership is Vietnam's most successful diplomatic event to date, opening up many new opportunities and raising Vietnam's national status.

According to Mr. Tien, the above 7 events have had an impact on the economy in general and the real estate market in particular, thereby supporting the market to gradually show signs of recovery after a long period of "hibernation".

Has the market bottomed out?

Adding to the viewpoint of FERI Deputy Director, Dr. Pham Anh Khoi - Director of DXS - FERI affirmed that the management policies issued by the Government have recorded a certain level of impact, contributing to making the market gradually move in a positive direction.

In fact, efforts to remove obstacles for real estate projects continue to be stepped up. Mr. Khoi said that in Ho Chi Minh City, the Prime Minister's Working Group has directed and resolved 67 real estate projects (equivalent to 37.2% of the initial 180 projects).

Of these, there are 28 projects under the guidance and supervision of the working group, 39 projects through local review, such as (Urban Green project, Delasol project, 1,200 A5, A6 apartments of Celadon City project, 280 apartments of lot 1.17 of The Metropole Thu Thiem project...).

The working group in Hanoi has directed and resolved 419 projects (equivalent to 58.8% of the initial 712 projects) and is continuing to resolve 293 projects.

In the third quarter of 2023, according to DXS - FERI's report, the real estate market recorded no increase in actual transactions, but customer sentiment has improved. The rate of customers searching for real estate has increased, especially in the segment serving real estate needs.

Real Estate - Has the real estate market reached the final stage of the recession? (Figure 2). — DXS - FERI survey.

In the recent surveys conducted by DXS - FERI, there has been a change in the psychology and behavior of real estate buyers.

When asked the question “Do customers intend to buy real estate when interest rates have decreased?”, 26% of respondents chose “yes”, 43% of respondents were “not sure”, and only 31% responded “no”, which shows that when interest rates decrease, market confidence is gradually returning, and the determination to spend money to buy real estate when interest rates decrease is also gradually improving.

However, Dr. Pham Anh Khoi frankly acknowledged that the domestic and world economic situation still has an unfavorable impact on the real estate market. Market confidence, although gradually returning, has not yet been fully restored.

Compared to the same period last year, in the first 9 months of 2023, the market continued to be short of new supply, with the absorption rate falling sharply to an average of around 20%. Policies to remove difficulties for the real estate market have not been clearly effective in promoting market recovery.

A bright spot in the market is that deposit interest rates have dropped to their lowest level since 2020, leading to interest rates offered for new loans also being adjusted down to the same level as early 2022.

And although the overall absorption rate of the whole market is still low compared to the same period in pre-crisis years (averaging around 20% of the whole market), the absorption rate of 2023 has gradually increased by quarter.

“The second quarter increased more than the first quarter, the third quarter increased more than the second quarter, and if this absorption rate growth momentum remains stable, it is expected that the real estate market will gradually warm up in the coming period,” Mr. Khoi stated his opinion.

Real estate will recover from the fourth quarter of 2023

Sharing his views on when the real estate market will improve, the Director of DXS - FERI said that entering the fourth quarter of 2023, a year has passed since the real estate market declined deeply. With the efforts of all parties from the Government to businesses, although there are still many difficulties, there are signs that the market is gradually getting better.

In the near future, the market is expected to receive new supply from projects that have been cleared of legal issues, low interest rates will also be maintained, and customers will receive more support in terms of credit limits for real estate loans, and investor psychology will gradually shift from observation to choosing suitable products to invest in.

Real Estate - Has the real estate market reached the final stage of the recession? (Figure 3). — Experts discuss at the Market Research launch event.

Accordingly, Mr. Khoi commented that the real estate market has reached the final stage of the recession, and now the market has almost hit bottom.

“According to the general rules of the market, when the bottom is reached, sooner or later the market will recover. Right now the market is starting to go through the bottom.

It is forecasted that in the fourth quarter of 2023, the real estate market will not have a sudden growth, but it will certainly have better growth than the same period in the fourth quarter of 2022. With a lot of information and positive changes from the end of the third quarter of 2023, it is completely reasonable to predict that the real estate market will gradually warm up from the end of the fourth quarter of 2023, and gradually recover more clearly from the second quarter of 2024", Mr. Khoi stated his opinion .

Source