Vietnam real estate market recovery cycle is being shortened

Recent statistics from the Ministry of Construction and numerous research organizations showed the real estate industry would be still struggling in the second quarter. Quiet and weak market conditions continue to prevail.

According to Ministry of Construction data, there are around 400 projects stalled in bureaucratic processes in only two main cities, Hanoi and Ho Chi Minh City. In Ho Chi Minh City alone, 156 projects remain blocked, and just 5 have been concluded despite much effort. These hurdles have remained unresolved for many years.

Differences between the real estate markets of 2023 and 2012-2013

Many analysts feel that, as compared to the final six months of 2022 and the first quarter of this year, the second quarter of this year has displayed better colours due to significant efforts by the Government, Ministries, and local authorities to solve these difficulties. Furthermore, the present real estate market differs greatly from that of 2012-2013.

According to Mr. Nguyen Van Dinh, Chairman of the Vietnam Real Estate Brokers Association, the years 2012-2013 and 2022-2023 are unique. The real estate market remained stagnant for a long time in 2011-2013, stretching from 2009 to 2011. During this period, the market struggled to recover. Only in 2013 did the government announce firm guidelines to ease and revitalize the real estate market. At the time, the market was quite difficult.

In contrast, the substance of the real estate market's issues lasts just a year in 2023. The present difficulties are policy delays, insufficient assistance, and cash flow issues caused by unexpected credit cutbacks that have halted market activities. During this time, however, the government has issued a number of definitive instructions demonstrating a clear aim about the direction of the real estate market.

Ms. Do Thu Hang, Senior Director of Research and Consultancy at Savills Hanoi, said "the market is currently facing even greater challenges in terms of accessing development capital, investment, and resolving lengthy legal project issues, which limit  supply sources. Product availability is limit ed, and growing development expenses are driving up prices". Ms. Hang believes that the market's recovery time and potential are determined by a variety of circumstances, including legal resolutions, finance, appropriate goods, and so on. According to Savills, the market will see additional positive developments by the end of the year, as real estate-related regulations are likely to be implemented, in addition to the Government's attempts to tackle market concerns.

Restoring market confidence

From the start of the year till today, the government has issued firm guidelines to help the market. Notably, the Government underlines in Resolution No. 33/NQ-CP on measures to eliminate barriers and promote the real estate market that all relevant organizations must prioritize responsibility and work to remove obstacles for a safe, transparent, and sustainable real estate market. Economic-civil connections should not be criminalized, and authorities and those who cooperate should be safeguarded...

Regarding legal hurdles in the resort real estate and officetel categories, the Government enacted Decree No. 10/N-CP on April 3rd, recognizing buyers' ownership rights. This is anticipated to alleviate legal bottlenecks for 83,000 condotel units around the country and to calm investor mood.

In addition, various more government directives and meetings have been held in order to discover measures to revitalize the real estate industry. Furthermore, the State Bank of Vietnam (NHNN) has decreased the operational interest rate four times since the beginning of the year, prompting commercial banks to drop their lending rates.

The Government continues to assign NHNN to implement synchronized, resolute measures to reduce lending interest rates by an additional 1.5 - 2% in the latest Resolution No. 97/NQ-CP on July 8, 2023; an effective solution is to vigorously implement the VND 40 trillion credit package to support interest rates and VND 120 trillion for social housing loans.

In addition, the Land Law, Real Estate Business Law, Housing Law, and other laws are being revised. These are regarded as encouraging signs for the "recovery" of the real estate market.

In Mr. Nguyen Van Dinh's view, the fundamental legal barriers in the real estate market will be removed in the third quarter of this year, thanks to the Government's steadfast policies and actions, as well as collective efforts to remove legal complications and the determination to revive the real estate market.

As a result, we need a step-by-step approach to help the market recover, beginning with activities. This starts with introducing items to the market, allowing transactions, and then setting off a chain of events. At that moment, economic activity will gradually normalize, money will return to people's hands, earnings will rise, and consumer demand will begin to climb.

"In general, if the real estate market wants to recover, it will do so gradually, but there will be signs of revival," says Mr. Dinh.