2020 would be another difficult year for Ho Chi Minh City’s real estate market due to lingered tight credit and red tape for real estate projects.

HCM City real estate market is predicted to sustain another hard year.

Data freshly released by the Ho Chi Minh City Real Estate Association (HoREA) show that only one housing project in the city was approved in principle throughout 2019 while no social housing projects were implemented.

HoREA said real estate developers and the market at large faced a great number of difficulties and challenges during 2019 while market size and project supply, and housing supply all plunged. In general, most real estate firms suffered a sharp drop in both revenues and profits, even some sustained big losses or are now on the edge of bankruptcy.

Only one commercial housing project in the southern city was approved in principle, down 12 in number on year while investment permits were granted to the developers of four commercial housing projects, a year on year decrease of 24 in project number. No new social housing project was launched last year while only three underway social housing projects with the combined supply of nearly 2,300 apartments were completed.

Dr. Su Ngoc Khuong, a real estate expert, said the HCM City real estate market, particularly apartment segment would continue to fall into hardship during 2020 due to tight credit into real estate and red tape related to investment and construction procedures for housing projects.

“If the real estate sector is considered a big source of income for HCM City, it is necessary to sketch out drastic decisions on simplifying procedures for investors and offering them with investment opportunities as well. A large number of people from other neighbouring provinces and cities have flocked to the southern city for life, they of course need affordable housing products. And the municipal authorities should strive to handle this issue,” Khuong noted.

According to Nguyen Hoang, head of the research and development division under DKRA Vietnam, no breakthroughs would lay ahead for the real estate supply and consumption in 2020. Even if authorities ease or remove red tape for real estate projects, they would take at least one or two years to be completed and debuted in the market.

Investors, this year, are more cautious about projects delayed due to legal issues. Investment surfing is more difficult than those seen in previous years and investors should keep an eye on medium and long-term investments due to unpredictable market fluctuations.

Hoang predicted that the tourism and resort real estate segment will be a remarkable investment channel. “In the medium and long term, the tourism and resort real estate segment has great potential to go ahead thanks to robust tourism growth. In the short term, the real estate market may face difficulties caused by concerns about several condotel developers failing to pay returns as committed.

However, with clearer procedures and management of competent agencies and the thorough preparation of investors, the tourism and resort real estate segment will be further boosted, Hoang added.

As non-production segments like stocks or real estate are subject to tight credit policy, foreign direct investment (FDI) inflows are regarded as "lifesavers" which are expected to a major capital channel for these segments during 2020. Therefore, the sufficient legal framework acts as a key element to ensure a healthy and sustainable investment climate.

“Legal issues are always a major concern to investors, especially foreign investors eager to make investments in the Vietnamese market. Legal issues would navigate their final decision on adding their further capital into the market. Hence, the perfection of legal framework is an urgent need to leverage investments into the Vietnamese market, especially those by foreign investors,” said analyst Bui Quang Tin.

Dr. Dinh The Hien, a real estate expert, said he believes that the real estate market has no enough good foundations to bounce back very well during 2020.

Hien added that the market in general remains muted while only real estate products purchased for rent, use, and real demand would be traded stably this year, while other segments like land plots which have traditionally attracted long-term investments are unlikely to enjoy growth during the year.

Thus, investors should be cautious and consider carefully before making investments, said he, stressing that more attention would be paid by investors to the apartment segment during 2020. 

"Apartment is likely to ensure a very good living environment for young and middle-income people and those in desire for a convenient and affordable living environment. Therefore, investors are increasingly eager for apartments which are expected to be a kind of fixed asset and yield stable and long-term income rather than high returns coupled by enormous risks", Hien stressed.

HoREA forecast that real estate developers could remain at standstill during the first half of 2020. However, if the government and the municipal authorities quickly and actively solve difficulties facing real estate firms, the market is likely to rebound from the third quarter of 2020 towards higher transparency and fairness.