Three scenarios for the Vietnamese real estate market

According to a market analysis produced by the Dat Xanh Services Economic, Financial, and Real Estate Research Institute (DXS-FERI), the real estate market is now showing numerous good indicators and is expected to revive.

The market is forecast to gradually recover from a U-shaped bottom, with the speed of recovery depending on both macro and micro factors, the most important of which remains the improvement in market confidence.

Positive Movements

In the ideal scenario, the property supply increases by 30% - 40%, floating interest rates range from 8% - 10%, sales prices increase by 10% - 20%, and the absorption rate reaches 40% - 50%. In the expected scenario, the supply increases by 20% - 30%, with floating interest rates from 9% - 11%, sales prices increase by 3% - 5%, and the absorption rate reaches 30% - 35%. In the challenging scenario, the supply increases by 10% - 20%, floating interest rates range from 10% - 12%, sales prices remain flat, and the absorption rate reaches 25% - 30%.

DXS-FERI experts lean more towards the expected scenario. Accordingly, the real estate market in Q2 2024 will see an increase in new supply by about 20 - 30%, sales prices also slightly increase by 3–5%, and the overall absorption rate will reach 30%–35%.

DXS-FERI forecasts the market for Q2 2024, stating that, overall, despite many problems and inconsistent recovery across segments, the Vietnamese real estate market is emerging from its most challenging time, with more favorable moves in terms of total real estate supply. As a result, all forms of real estate are experiencing an increase in new supply.

For office leases, supply is expected to reach 2.15 million m2 in Hanoi, up 2% quarterly, and 2.7 million m2 in Ho Chi Minh City, up 4% quarterly.

The average rental price in Hanoi is projected to stay unchanged quarterly at around 21.5 USD/m2, while the rental price in Ho Chi Minh City is expected to rise by 5% to 34 USD/m2. The average occupancy rate in both markets has marginally increased, with 86% (up one percentage point quarterly) in Hanoi and 91% (up one percentage point quarterly) in Ho Chi Minh City.

Meanwhile, the supply of retail space in Hanoi will remain at 1.8 million m2 and expand to roughly 1.53 million m2 in Ho Chi Minh City, an increase of 3% every quarter. The average rental price is steady in both sectors, at around 46 USD/m2 in the Hanoi market and 53 USD/m2. The average occupancy rate in the Hanoi market has increased slightly to 86% (up 1 percentage point quarterly), while it stays at 90% in Ho Chi Minh City.

Notably, new supply will come from the Vincom Mega Mall in the Vinhomes Grand Park urban area, Ho Chi Minh City. Some projects might not be completed in time for Q2 2024, so the supply will not change much.

Improving Supply

Retail real estate is likely to rebound faster and more vibrantly as the economy recovers and demand for shopping and leisure rises slightly. Investors are increasingly focused on retail real estate and actively developing relevant land funds. In the short and medium term, large players like Lotte, AEON, and Vincom, as well as newcomers like THACO and Central Pattana, will continue to dominate the market.

DXS-FERI predicts that the industrial real estate market will continue to develop healthily, with the Northern Vietnam region adding around 15,000 hectares, an increase of 3% quarterly. The Southern Vietnam region is scheduled to be supplemented with approximately 27,900 hectares, growing by 1% quarterly. The resurgence of the manufacturing sector, higher export orders, and the admission of a large number of new FDI enterprises will all drive fresh rental demand.

The occupancy rate is predicted to stay steady in the Northern Vietnam region while increasing slightly (approximately 1 percentage point) in the Southern region. Rental costs are predicted to stay constant and competitive when compared to other markets in the region, resulting in a high occupancy rate in industrial parks.

Notably, for residential real estate, Q2 2024 is estimated to see an increase in new supply by about 25% compared to Q1 2024, mainly from projects that have been launched or started in earlier stages. The expected new supply is about 4,500 units, bringing the total accumulated supply of the market in Q2 2024 to 45,200 units.

"The increase in supply helps customers have more diverse choices and also contributes to improving absorption rates, as well as the overall transaction situation in the market" - DXS-FERI experts expect.