Housing market expected to rebound in H2/2024

Real estate may continue its downward trend in the first half of 2024, before showing signs of recovery in the remaining six months. Nguyen Van Dinh, Vice Chairman of the Vietnam Real Estate Association, talks to The Hanoi Times about the prospects for the property market this year.

How did the property market perform in Q4 2023 and throughout the year?

The market heated up in October-December 2023 as some developers released new supplies to the market. The number of units offered for sale increased by 6% quarter-on-quarter to almost 21,800 units. The number of units purchased was 5,700, very similar to the figure recorded in Q3 and twice as high as in Q1. The absorption rate rose by 12 percentage points year-on-year to 26% in Q4.

Vice Chairman of the Vietnam Real Estate Association Nguyen Van Dinh.

In general, however, the sector underperformed over the year. Although total deliveries in 2023 increased by 14% year-on-year to more than 55,300 units, the figure was only a third of 2018. Few projects were approved, while thousands were suspended due to legal issues and a shortage of capital. In the affordable housing segment, only 46 projects were completed, putting more than 20,200 units on the market, or 4.7% of the plan for 2021-2025.

In 2023, a total of 18,600 housing units were purchased, which is the same level as in 2022, but 83% less than in 2018. In the segment of townhouses, villas and vacant plots, stop-loss transactions were rare, but the average selling prices of these segments remained comparatively high about their true values and buyers' incomes. The average selling price of an apartment was VND51.7 million (US$2,124) per square meter in Hanoi and VND71 million (US$2,916) in Ho Chi Minh City.

Buyers had high aspirations but were challenged by low supply and high sales prices, while economic difficulties weighed on their incomes and cost-cutting was a priority. Market speculators were largely absent during this period. Market changes did not meet expectations, while stimulus measures were temporary and had little impact.

How do you assess the impact of the government's, ministries', and authorities' policies on the real estate sector in 2023?

The government, ministries and local banks had a busy year, providing maximum support to the real estate sector. From the beginning to the end of the year, the central authorities issued a total of 22 regulations, particularly Resolution 08/2023/ND-CP, which amended the rules for the issuance and trading of corporate bonds. These regulations were the lifeline that prevented the collapse of the corporate bond market.

Data from the Ministry of Finance showed that as of 25 December 2023, 78 companies had issued corporate bonds worth about VND245.9 trillion ($10 billion). This included about VND2 trillion ($82 million) worth of bonds that had been sold by March 5, when the said resolution took effect. Since that day, the amount of bonds sold and the rate of bond settlement increased from 16% in February to 63% in October. Among all sectors, real estate developers and traders had the second-highest bond sales, up 15% year-on-year to VND77.1 trillion ($3.17 billion), accounting for 29% of the market total.

Houses and high-storey buildings on the coast of Nha Trang City, Khanh Hoa Province. Photo: Trung Nhan/The Hanoi Times

The policy of allowing companies to defer their debt payments, reducing the VAT rate by 2% and curbing land rents became the main stimulus for many struggling property companies. In addition, the creation of a special multidisciplinary team consisting of members from relevant ministries and the Central Bank helped to resolve problems and bottlenecks for about 500 real estate projects and opened a new development path for the resort and tourism property sector.

However, most of the measures were merely effective on the market, and only two were truly impactful. In addition, the banking system remained too cautious towards bond issuers. The measures taken by both the state bank and commercial banks showed their openness and willingness to support local companies, but in reality, they had little impact on the market. For example, only 1% of the VND120 trillion ($4.9 billion) fiscal stimulus package was disbursed during the year.

What solutions will facilitate the recovery of the real estate sector in 2024?

To facilitate the realty sector, we need practical, ready-to-go and open-minded policies to address all categories of issues. We also need all stakeholders to participate and ensure the policies are properly implemented.

We suggest that the National Assembly pass the Land Law soon and coordinate it with the Housing Law and the Real Estate Business Law to avoid overlapping between the three laws. We should find a way to calculate the land use fee that will stimulate the construction of affordable housing for the majority of people, especially middle-income earners. It is strongly recommended that the authorities facilitate the best conditions for the development of affordable housing and the renovation of downgraded tenements.

Government agencies should take strict punitive measures against those who neglect and ignore the regulations and encourage central and local officials to enforce them. In addition, the special interdisciplinary team needs to improve its performance.

The government must take measures to encourage more public investment projects by addressing the problems of administrative procedures and compensation and resettlement of people for land clearance to speed up the project implementation plan. In addition, cheap loans and relaxed credit policies should be provided to allow investors and buyers to tap foreign capital, while drastic measures are needed to ensure a transparent corporate bond market.

In addition, government agencies need to devise new fiscal and financial instruments, such as tax incentives, to reduce input costs for local developers and lower housing prices to match buyers' income levels. Meanwhile, property trading companies are advised to review their product portfolios, focus on feasible projects, continue to restructure their selling prices to meet the practical demand of customers and develop new incentives for both buyers and retailers. They should understand that market health comes first, then profits.

Thank you for your time!