Dr. Hoang Van Cuong, a member of the National Assembly's Finance and Budget Committee, believes that the real estate market is still in a slump. However, there have been developments during the period of late 2022 to early 2023.

A breakthrough is still needed

Previously, debt pressure on huge real estate enterprises jeopardized their market survival during the "fall" of the corporate bond market and the consumer confidence crisis. This pressure has now subsided slightly.

While there are no imminent dangers of a recession, the market's recovery has been slow and solid, but not revolutionary; it has plateaued. The real estate market cannot be deemed totally rejuvenated due to the economy's delayed recovery and poor purchasing power. Liquidity in many areas is limit  ed, and a lack of supply has resulted in small price decreases. There are no obvious symptoms of fundamental reorganization.

The real estate market is inextricably linked to the economy. If the economy grows, the real estate market will follow suit. The current economic condition, however, remains sluggish. Despite successive rate decreases and enhanced credit support, the market's absorption capacity remains limit  ed. Because the economy has yet to make a substantial breakthrough, expecting the real estate market to recover quickly is unrealistic.

The total industrial output index is expected to fall by 0.4% by August 2023 when compared to the same month last year. The entire import-export turnover is estimated to be USD 435.23 billion, representing a 13.1% decline from the previous year. Order volumes have remained modest, and worker earnings have not increased. To survive, many businesses have had to pare back their operations and lay off employees. In the first eight months of 2023, 124.7 thousand enterprises exited the market, a 15.6% increase over the same period previous year.

The data from the real estate sector likewise offer a bleak image, echoing the general economic situation. According to General Statistics Office statistics, there were 3,066 newly created real estate enterprises countrywide in the first eight months of 2023, a decline of more than 53% from the same period in the previous year. In the meantime, the number of dissolved businesses climbed by about 11%.

Furthermore, the provision of social housing remains extremely limit  ed. Without early actions to expand supply, an undesirable housing boom may arise in the future.

Capital and legal obstacles to be addressed

In truth, the two most major challenges for real estate enterprises throughout the restructuring process are capital and legal issues—two critical aspects affecting project formation and growth regardless of the size of the organization.

The most significant legal impediment is most likely the approval procedure for initiatives to begin and enter the market. At the moment, real estate supply is limit  ed, particularly in the medium-priced commercial housing market. However, the amount of new real estate projects being begun is small, owing mostly to lacking legal prerequisites for development to begin. These initiatives have been hampered by issues such as land value, financial responsibilities determination, and land use purpose transition procedures.

In terms of finance, real estate firms now demand long-term capital investments. However, due to the previous period's tight lending standards for real estate, along with outstanding current obligations, many enterprises are unable to receive bank funding due to a lack of essential borrowing requirements. Furthermore, bonds, a critical source of capital, have been flat since the conclusion of last year's financial crisis.

As a result, the immediate answer is to resolve legal procedures for projects that are in the planning stages or are ready to enter the market to supplement fresh supply. If the impediments to a project lie under the control of local governments, decisive steps within the current legal framework, such as property value, financial obligations determination, or land use purpose alteration, are required.

The present issues center on Land Law, Housing Law, and Real Estate Business Law for long-term solutions. Ideally, the National Assembly will change these laws by the end of this year to establish a foundation for addressing legal issues and assisting enterprises.