Waiting for approval of important legal frameworks for the market
According to Savills, one of the factors that helps Vietnam maintain its great appeal to foreign investors is its large population of over 100 million people. Of which, Ho Chi Minh City and Hanoi have more than 10 million people. This leads to a relatively large demand for housing and offices in these two cities.
In addition, the Vietnamese Government's commitment to attracting foreign direct investment (FDI) and supporting industrial parks has created the attractiveness of the Vietnamese market for foreign investors.
Ms. Do Thu Hang, Senior Director, Research and Consulting Department, Savills Hanoi, assessed: From experience working with foreign investors, the perspective on the Vietnamese real estate market can be divided into two main directions.
Vietnam's real estate market remains very attractive to foreign investors, for many reasons. (Photo: LD)
First, project-level investment and corporate-level investment. From the corporate-level perspective, investors focus on listed real estate companies. Despite some long-standing challenges in the Vietnamese market, such as legal procedures, Vietnam remains attractive to foreign investors thanks to its strong economic growth and stable political institutions.
Despite its modest GDP, Vietnam’s recent high growth rates have attracted investors, especially during challenging times. However, the complexities of legal ownership of residential real estate in Vietnam still pose limitations to the participation of foreign individual investors in the mid- to high-end segments.
Land funds in large cities such as Ho Chi Minh City and Hanoi seem to be running out. However, recently, the government has promoted public investment in urban and infrastructure projects in satellite cities surrounding Ho Chi Minh City and Hanoi.
As a result, domestic investors have been able to participate in larger-scale projects than before. Investors who own large land funds in satellite cities are ready to deploy, especially in 2024, benefiting from monetary policies, accessible interest rates and room for expansion for real estate business growth.
"Currently, investors are still waiting for open legal policies to promote development and provide products to serve social needs," Ms. Hang emphasized.
The market has positive changes.
According to Ms. Hang, the real estate market is entering a new development cycle. Looking back at the end of 2023, the market is generally showing positive changes, but challenges still exist.
Since the beginning of 2023, the Government has actively and continuously taken action to remove obstacles and difficulties in the market. For example, Decree No. 08/2023/ND-CP, Resolution No. 33/NQ-CP, Decision 338/QD-TTg, Decree No. 10/2023/ND-CP, Circular No. 02/2023/TT-NHNN, Telegram No. 1376/CD-TTg, Telegram 965/CD-TTg, etc.
At the same time, the National Assembly passed the 2023 Law on Real Estate Business and the 2023 Housing Law in November 2023. The draft revised Land Law 2023 is a major law project that needs to be carefully reviewed and quality assured before being passed in the near future. The number of new projects and new supply has improved but not much, the limited supply situation still remains.
In the second half of 2023, the market recorded improved liquidity in a number of apartment projects that converged many good factors such as reputable investors, products corresponding to the quality class with reasonable area, good expected handover quality, good location, guaranteed legality, full and convenient utilities, attractive sales policies including extending payment schedule, interest rate support... but the number of these apartment projects is not much.
High housing prices are also a problem affecting liquidity. Furthermore, legal concerns that the project cannot be completed when customers have fulfilled their obligations are also one of the factors affecting transaction volume.
"Throughout the past year, real estate businesses have had to drastically restructure their project portfolios, improve cash flow difficulties, and reduce the pressure of the current huge market purification. This restructuring is often not quick and still takes time to implement," said Ms. Hang.
Entering 2024, the market still has many challenges that need to be addressed before there is a clear recovery. In 2024, the revised Land Law, if passed, will create great momentum for the market in addition to the 2023 Real Estate Business Law and the 2023 Housing Law, which will take effect from the beginning of 2024.
Many of the previously awaited issues will have clear answers this year. Supply will gradually improve. Infrastructure investment is being boosted along with strong economic growth prospects, which will increase demand for real estate in all segments.
However, it is necessary to solve the problem of supply-demand imbalance, there must be many affordable products, and diversified business forms to meet the wide demand. Besides, reducing product prices is currently difficult to do, but if it can be done, it will attract demand. The Government/State has been taking many necessary measures to promote the market.
"Investors must do the same at this time, taking many measures to improve the dependence on cash flow from banks by mobilizing from other channels such as investment cooperation, investment portfolio structure, extending payment schedule to reduce cash flow pressure of buyers to promote investment decisions, doing well in all stages," Ms. Hang added.
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