Recovery in Vietnam’s Real Estate Market: A Glimpse into Q2 2023

Vietnam’s real estate landscape is witnessing a notable resurgence in the second quarter of this year. The uptick, highlighted by an increase in newly licensed projects and stabilizing property prices, aligns more closely with genuine housing demand, suggesting a more balanced market dynamic. However, experts caution that continuous growth will necessitate comprehensive, coordinated solutions moving forward.

Government Initiatives Driving Stability

According to the Ministry of Construction (MoC), decisive actions from the government, including the Prime Minister and local authorities, have played a critical role in cooling down the soaring property prices seen toward the end of 2024. As a result, the market is now trending toward steadier conditions, with expectations of stable supply and transaction volumes in the coming months. This shift has fostered an environment more conducive to sustainable growth—vital for maintaining the momentum observed so far.

Policy Transformations Supporting Demand

Several strategic policy changes have contributed to the improved outlook for real estate. One such significant change is the transition from a three-tier to a two-tier local government model. This adjustment is anticipated to catalyze enhancements in regional planning, transport infrastructure, and socio-economic development. Additionally, the government is exploring State-run real estate and land trading centers while introducing regulations aimed at addressing longstanding bottlenecks—particularly for large-scale commercial and social housing projects.

Apartment Prices at Record Highs

The second quarter saw a robust increase in housing transactions, which rose to over 157,000—an impressive 16.6% increase from the previous quarter. Demand spanned various segments, with land plots gaining the highest traction. In major cities like Hanoi and Ho Chi Minh City, apartment prices have reached levels not seen in nearly a decade.

In Hanoi, the average selling price soared to VND80 million ($3,075) per square meter, reflecting a quarterly uptick of over 5% and more than 30% year-over-year. Central districts, particularly high-end developments, fueled this ascent driven by limited supply and heightened buyer interest.

Similarly, Ho Chi Minh City reported an average price of VND89 million ($3,425) per square meter—a modest change since the first quarter yet indicative of a striking 36% increase from the past year. The secondary market also recorded considerable gains, especially in well-connected areas boasting completed infrastructure and newly handed-over projects.

The Land Plot Market: Cooling Down

Interestingly, the MoC indicated signs of localized “fear” regarding land prices at the end of the first quarter, particularly in cities like Hai Phong, Bac Ninh, Phu Tho, Ninh Binh, Hung Yen, and Dong Nai. Speculative buying largely contributed to this spike, prompting local authorities to issue warnings and ramp up market supervision. Consequently, land prices stabilized, with only slight increases of around 3-5%.

By the second quarter, land pricing patterns exhibited variability. In prime urban zones of Hanoi and Ho Chi Minh City, asking prices remained elevated, reaching up to VND165 million ($6,345) per square meter. Conversely, cities like Da Nang and Hai Phong displayed lower pricing trends yet still indicated growing interest. Binh Duong saw diverse pricing across various developments, catering to both affordable and high-end markets.

Progressive Regulatory Measures

To underpin sustainable growth, the MoC is keen on implementing reforms unified under the government’s resolution. Initiatives include streamlining administrative procedures and transitioning to a two-tier local government setup. Emphasis lies on reviewing legal frameworks related to planning, construction, land, housing, and real estate business operations.

Local authorities are urged to address the obstacles that hinder project implementation actively. Collaborating with the Ministry of Finance (MoF), the MoC is working on a Steering Committee aimed at resolving issues afflicting backlogged real estate projects. Recently, a mid-year review conference focused on social housing assessed progress and established tasks for future development.

Enhancing Land Planning and Allocation

Efforts are underway to expedite land planning and allocation, particularly in urban zones and industrial parks. The drafting of a new decree related to a National Housing Fund is also in progress. A pilot for a “State-Managed Real Estate and Land Use Rights Transaction Center” is set for government submission along with initiatives aimed at enhancing real estate information systems for better transparency.

Cooperation among various ministries and local authorities is being fortified to further advance social housing initiatives and mitigate legal roadblocks. This coordinated approach aims to foster fair practices in land auctions and ensure expedited project approvals.

Financial Sector and Housing Credit Solutions

The State Bank of Vietnam (SBV) has a pivotal role in this equation. The bank is encouraged to speed up the disbursal of a VND120 trillion ($4.62 billion) preferential credit package for social housing and to explore mid-term financial solutions tailored to maintain stable interest rates for affordable housing. Additionally, relaxing lending conditions for both individuals and businesses is expected to foster a conducive environment for first-time buyers.

Commercial banks are anticipated to classify real estate projects and provide customized support, such as loan restructuring or repayment deferrals, to uphold the stability of the banking system while addressing troubles in the real estate sector.

Local Authorities on the Frontlines

Cities and provinces are called upon to improve the dissemination of pertinent laws and policies. Transparency in housing and land use must be prioritized, and timely information concerning eligible real estate transactions should be made readily available. Expedited urban planning, particularly for Transit-Oriented Developments (TOD), is crucial for future growth.

Local governments must also enhance inspection efforts to prevent legal infractions in the real estate field. A focus on tightening oversight of property developers, brokerages, and land auctions, especially where price hikes appear unjustified, will bolster market integrity. By working seamlessly with the MoC, a national real estate database is on the horizon, along with policies tailored for resort and industrial real estate advancement.

Vietnam’s real estate market is navigating complex dynamics, teetering between recovery and challenges. As the landscape evolves, the collaborative efforts of government bodies, financial institutions, and local authorities will be fundamental to harnessing the market’s potential and ensuring its sustainable future.