The decline of mortgage rates helped propel purchases at some recent high-profile sales events, which in turn attracted considerable attention and boosted sentiment among market participants. Around 80 per cent of the new units Khang Dien House launched for sale in its mid-market Privia project were immediately bought at the sales launch event.

Michael Kokalari, chief economist, VinaCapital

Meanwhile, 80 per cent of Vinhomes new Glory Heights project units were sold, and 80 per cent of Nam Long’s Akari project were immediately sold.

All of these projects are located in periphery districts of Ho Chi Minh City. That said, we understand that transaction activity in suburban areas further from the city centre is still moribund.

The prices of new housing units offered for sale in Ho Chi Minh City and Hanoi are about flat on-year, but developers are reportedly offering mortgage assistance, such as extended grace periods and other incentives, to sell their units.

Furthermore, prices of apartments in the secondary market for which the seller does not have clear legal ownership status have seen a drop of circa 10 per cent.

This is just one example of how legal and regulatory issues continue to be the main impediment to real estate development in Vietnam. While there has been some recent incremental progress towards resolving those issues, we do not expect meaningful progress until well into 2024, although we see green shoots in Vietnam’s real estate market, a full recovery is by no means underway yet.

Finally, there has been a modest pickup in the total amount of credit expended to developers, which would also help them ramp up their development activity. However, Vietnam’s latest credit growth figures also indicate continued weak demand for mortgages, although that is likely to change now that mortgage rates have dropped in recent months.

However, two leading indicators that the worst is behind us are transaction volumes for plots of land increasing significantly recently; and there have reportedly been significant increases in the prices of selected prime real estate in Ho Chi Minh City and Hanoi for properties where the current owner has clear ownership/title documentation.

Prime real estate in the city centre is expensive, so the recent uptick in prices is largely being driven by wealthy local investors taking money out of the bank, now that deposit rates are falling, and purchasing properties.

Vietnam: a real estate market rebound in the making, illustration photo

At the beginning of November, senior government officials held high-profile meetings with major Vietnamese developers to address issues that are impeding real estate development in Vietnam. Industry executives identified legal and regulatory issues as the source of most of the industry’s current difficulties, identifying inconsistencies in the current regulations and legal framework as particularly problematic.

Two weeks later, Vietnam’s Prime Minister set up a special government task force to address those issues. By the end of November, some new legislation was enacted to clarify certain specific issues such as the exact options developers have to fulfill their obligation to produce affordable/social housing, and how much deposits developers are allowed to collect from home buyers before a project’s construction is commenced.

In light of that apparent quick pace of progress, many market participants are now hopeful that an overhaul of Vietnam’s land law that will address one of the key bottlenecks impeding real estate development in Vietnam is imminent: the determination of land values and the fees payable by developers to the government.

The downturn in Vietnam’s real estate market has bottomed out, partly because mortgage rates peaked and are now headed lower. While a full-scale revival in the market is not likely to take root until mid-2024, there are some signs that a rebound is already in the making, including significant increases in the prices of prime properties in downtown Ho Chi Minh City and Hanoi and a pickup in the volume of land lots changing hands.

The latter is a segment of the market which had been completely dead for months, and the recent activity is a good indication that long-term investors, as well as speculators, have started paying attention to the real estate market again.