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Vietnam Real Estate Sector – 2023 Review and Outlook
Executive Summary
The year 2023 presented formidable challenges to Vietnam’s residential real estate sector, with significant headwinds stemming from high-interest rates, legal impediments, and economic downturns. This report thoroughly examines various aspects of the sector, including the obstacles it confronted, regulatory changes, sector performance, and prospects.
Challenges
In recent years, the easy access to the corporate bond market has led to soaring land prices, particularly affecting the availability of affordable and mid-range housing, where most demand lies. However, the tightening of the corporate bond market since 2022 has restricted developers’ financial resources. By early 2023, rising interest rates had hit developers’ profits and reduced buyers’ purchasing ability. Legal delays in project approvals added to developers’ challenges in selling their projects, worsening the situation. The economic downturn further weakened buyer confidence, resulting in a significant 44.8% y/y drop in house transactions in 2023.
Regulatory Changes
Vietnam shifted from a highly conservative stance in the real estate market, including tightening the corporate bond market and reducing banking loans to developers starting early 2022, to a completely supportive approach for sector recovery by late 2023. This change was marked by the implementation of the Real Estate Business Law, Housing Law, and Amended Land Law 2024 (effective from 2025), aimed at simplifying legal procedures, protecting homebuyers, and strengthening developers’ financial stability.
Sector Outlook
Considering the broader economic landscape, financial market dynamics, developments within the real estate sector, and the introduction of new regulations, we can discern the pivotal trends influencing the long-term trajectory of Vietnam’s real estate market. The good: There are promising indicators pointing towards improvements in the real estate sector starting from 2024. This can be attributed to historically low mortgage rates, economic recovery, and substantial progress in infrastructure expansion. These factors create a favorable environment for increasing prices and transaction volumes, particularly benefiting projects led by reputable developers with clear legal standings. The bad: Several undeveloped projects lacking residential land may face cancellation, while stricter capital requirements are prompting weaker players to exit the market. The ugly: Housing prices are anticipated to remain high due to various factors, including rising land costs and government control over land supply. Additionally, developers are mandated to have more capital, potentially leading to higher selling prices.
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