5 variables to drive Vietnam's real estate market in 2H23

According to Mr. Nguyen Van Dinh, Chairman of the Vietnam Association of Realtors (VARs), the real estate market in Vietnam would be influenced by five variables in the second half of 2023.

First, the GDP growth rate for the first six months of 2023 is 3.72%, up from 1.74% in the same time in 2020 in the 2011-2023 period.

As of June 20, total pledged FDI capital in Vietnam was at $13.43 billion, a 4.3% decline from the same time the previous year. The real estate business sector came in third place, with a total registered capital of $1.53 billion, a fall of 51.5% from the previous year.

The total amount of foreign direct investment (FDI) in Vietnam for the first six months is anticipated to be $10.02 billion, a 0.5% rise over the same period last year. However, real estate commercial activity only achieved $502.1 million (5%), a 43% decline from the same time last year (which reached $881.3 million).

Second, FED's pause in rate hikes in June 2023 has a beneficial influence on market confidence, particularly in the stock and real estate sectors. However, further Fed signals are required for a thorough assessment.

According to the most recent economic data from China's National Bureau of Statistics, the Chinese economy is not rebounding as quickly as projected. China's weakening domestic and export demand has hampered global economic recovery, particularly in Vietnam.

Third, the government continues to demonstrate its concern and desire to assist the market by releasing a succession of decrees/resolutions/circulars/directives.

It is worth mentioning that some provinces/cities are taking steps to resolve challenges and hurdles for specific projects. However, there are still barriers in the bidding and approval procedures that impede the selection of investors, particularly for social housing projects.

Due to legal and procedural obstacles in investment and construction of social housing, the 120 trillion VND interest rate support package has not produced any bank loans thus far, which has not persuaded investors to participate.

Fourth, the distribution of public investment money has improved. When compared to the same period last year, the investment capital from the state budget executed in the first five months of 2023 grew by 18.4%.

The strategy of encouraging public investment, particularly in the infrastructure sector, would encourage economic growth and generate numerous economic, tourism, and urban regions, resulting in greater demand for homes, resorts, services, and offices.

Several expressways, including those in Can Tho, Khanh Hoa, and Buon Me Thuot, are being built on time, which is a positive indicator.

Fifth, real estate credit expanded by 9.78% in the first four months of the year, three times the general credit of the economy. According to laws, credit institutions continue to make loans for projects with viable lending plans.

FDI inflows into real estate declined drastically by 61% in the first five months of 2023 compared to the same period last year, losing its position as the second-largest investment magnet. Due to a lack of market liquidity, buying power has not improved.

According to VARs, the market will get increased supply from social housing developments in the final six months of the year. The inexpensive category is expected to show clearer indications of recovery by the end of the third quarter.