According to Mr. Vo, the real estate market is still "thawing"; many projects are undergoing investigations, inspections, and audits, and there is a pushing of responsibilities and slow resolution of procedures, which are the causes of a scarcity of legally qualified housing projects for approval to supplement the market (especially mid-range and high-end housing).

Legal issues are causing a bottleneck in the supply

Since 2016, the Prime Minister has regularly urged that the Land Law be amended. In 2020, the Prime Minister proposed that the 2013 Land Law be amended to remove barriers to the approval of big metropolitan regions. Large projects with many plots of land utilized for diverse purposes are governed by a variety of legal papers.

When land laws do not clearly establish the unified resolution options, local governments sometimes feel helpless. In a new urban area project, for example, the land contains agricultural land, public land in the form of roads and canals, property utilized by state institutions that is awaiting reorganization, and contaminated production land that must be transferred. However, according to Mr. Vo, the problem has been discussed but not resolved.

Regarding legal disputes, the 2014 Housing Law permits foreigners to acquire houses with limit ed tenure in Vietnam, yet the 2013 property Law does not offer foreign persons or organizations the right to utilize property for residential purposes in Vietnam. The Land Law only allows foreign investors to carry out commercial real estate development projects, not personal ones.

Furthermore, there are several conflicts among key real estate laws, such as investment laws, real estate business laws, and planning laws.

"Typically, the real estate market becomes stagnant when there is an oversupply and inadequate demand, or when there is insufficient cash to invest in the market, limit ing its financial capacity to function. Currently, the market is experiencing a supply constraint while remaining stagnant," said Mr. Dang Hung Vo.

Furthermore, the Vietnamese real estate market is characterized by extremely high capital costs based mainly on credit, equities, and bonds. Investors only need to provide between 25-35% of the entire investment for the project, with the remainder coming from future purchasers. Of course, when projects cannot be authorized in the current environment, it causes a supply scarcity as well as a lack of money from future real estate sales.

Apartment prices will continue to rise

Mr. Dang Hung Vo feels that the quality of modifying legislation would have a big impact on the supply of various market categories in the next term. If planned revisions to the Land Law, Real Estate Business Law, and Housing Law are approved in 2023, they will have a substantial influence on the real estate market in the second half of 2024 and into 2025.

However, it is unclear whether the supply and capital sources for the real estate market can be fixed. According to Mr. Vo, if the laws are not completely revised, persons in positions of power would find it difficult to approve projects, implying that they will not dare to accept them as they do now.

In Resolution 33/2023 of the Government on some solutions to remove barriers and promote the safe, healthy, and sustainable development of the real estate market, one solution mentioned is that the Government will draft a resolution to submit to the National Assembly for consideration and issuance, aiming to create uniformity in the project approval process.
“This is a good solution as it gives confidence to the officials with the authority to approve projects and provides a unified legal framework for project approvals”, said Mr. Vo.

As a result, the government must release a decree outlining the uniform sequence and processes for authorizing real estate projects in order to overcome barriers, disputes, and overlapping concerns among laws. The remaining problem is ensuring that many ministries collaborate with a cohesive perspective, rather than a fragmented approach based on their individual powers.

Mr. Dang Hung Vo believes that the future of the real estate market in general, and the Hanoi real estate market in particular, will face an increasingly depleted supply and a lack of cash, which will make it impossible to meet people's housing, living, and business demands.

"The non-agricultural land use tax will not have much impact on residents in apartments, and if the state imposes taxes on houses to prevent speculation, it will not affect the apartment segment significantly."

The value of land use rights is likewise not significant within the cost of an apartment, accounting for just around 10-20% of the entire cost of the unit. This is the primary reason why extremely high land costs in Vietnam have little effect on residential units in apartments.

Mr. Dang Hung Vo believes that "mid-range and high-end apartment prices will not decrease and will continue to rise in light of the current situation." In reality, apartment prices will continue to rise."