What is the outlook for the Vietnamese property market in 2H22?

In comparison to the same period in 2021, the apartment segment's new supply increased by 78% in 1H2022. 

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In comparison to the same period in 2021, the apartment segment's new supply increased by 78% in 1H2022. In the meantime, compared to the same period last year, the new supply of townhouses/shophouses and resort villas surged by 170 percent and 25 percent, respectively, in the first five months of this year.

Limited demand

Although the supply of new homes rose, they were dispersed unevenly and only concentrated in the final phases of a few sizable projects. While the secondary prices and liquidity were mostly stable, the primary prices were under pressure from rising input costs.

Mr. Vo Hong Thang – R&D Deputy Director at DKRA Vietnam, said that for real estate projects and investors, bank loans and corporate bonds are necessary. Due to the limit ed availability of these two capital sources, there were some unfavorable effects, including a potential decrease in new supply, a cooling off of market demand as a result of buyers' inability to obtain loans, and an increase in selling price as a result of the investor's need to access additional loans with high interest rates.

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Risk warnings

Mr. Vo Hong Thang warned that the second half of 2022 and the beginning of 2023 would be risky times for the Vietnamese real estate market.

First, it's expected to keep getting tighter with bond issuance and bank loans for real estate.

Second, it is anticipated that the price of construction supplies will keep rising.

Third, certain political unrest around the world has an adverse impact on the world economy.

Fourth, inflation would be significant in many nations and unpredictable in Vietnam.

Fifth, the primary prices have been steadily rising, making them unaffordable for many buyers with genuine home needs. In some segments and locations, real estate prices are already 20–25 times higher than average household income, and this ratio is expected to rise in the near future.

"From a business standpoint, property developers are probably going to encounter a lot of challenges in fundraising for projects, slowing down project progress, causing them to miss out on certain market opportunities, or forcing them to approach other capital sources at higher costs, which will reduce corporate profits", said Mr. Vo Hong Thang.

Mr. Vo Hong Thang recommended businesses swiftly adapt to the current market conditions by: diversifying capital, particularly capital from domestic and international investment funds (Japan, Korea, Singapore, etc.) at appropriate interest rates; planning M&A deals and working with other investors to create joint projects; and concentrating resources on legally competitive projects to hasten project completion.