The Vietnamese real estate sector is witnessing a strong recovery, as more than 3,200 real estate businesses return to the market in 2024, marking a significant 42% increase compared to 2023. According to the latest report from the General Statistics Office, this resurgence in business activity reflects a positive shift in the market after a period of stagnation.
The improved performance of the market in 2024 is largely attributed to the easing of some of the challenges that hindered growth in previous years. Notably, the number of businesses dissolving has slowed down, with approximately 1,300 companies closing down in 2024. This is a marked improvement from the over 2,000 closures recorded in 2023. Meanwhile, the number of new businesses, though slightly down by 2.7%, remained substantial, with nearly 4,600 new real estate ventures launched during the year.
Factors Behind the Market Recovery
Several key factors have contributed to this resurgence. The Ministry of Construction noted that the market had “surpassed the bottom” it hit in 2023, with real estate supply gradually increasing after a period of significant limitation. In the third quarter alone, 23 new projects with nearly 12,000 units were licensed, representing a 53% increase compared to the same period in 2023.
Improved liquidity has also played a role in encouraging businesses to re-enter the market. The number of transactions in the real estate sector, including apartments, single-family homes, and land plots, saw an uptick in the third quarter. Apartment and home sales increased by 29%, while land plot sales grew by 13% over the previous year, further boosting market confidence.
Legislative and Legal Changes
Mr. Nguyen Van Dinh, Vice President of the Vietnam Real Estate Association (VNREA), attributed the recovery to the introduction of new laws, which took effect on August 1, 2024. These laws have opened up new legal pathways for the market and allowed many investors to launch products that had previously been delayed due to regulatory uncertainty. The new land price list, which helps streamline the calculation of land use fees, has also been a critical factor in removing obstacles for businesses to restart their projects.
Additionally, the booming trend of corporate bond buybacks has helped real estate companies clear their bond debt. According to the Vietnam Bond Market Association (VBMA), real estate remains the second-largest sector in terms of bond issuance, with more than VND 63,000 billion issued by the industry in the first 11 months of 2024. This figure represents a nearly 23% increase compared to 2022.
Ongoing Challenges and Market Risks
Despite these positive developments, the real estate sector still faces several challenges, particularly in the areas of legal hurdles, financial obligations, and rising input costs. Mr. Can Van Luc, Chief Economist at BIDV Bank, highlighted that the recovery remains slow and uneven across different market segments and regions. Legal issues continue to be a significant burden on the industry, and despite improved liquidity, the demand for real estate loans remains tepid due to high housing prices and stagnant real incomes.
Moreover, speculative activities in certain parts of the market, particularly in the suburbs of Hanoi, have driven up prices. Auction prices in these areas have surged, reaching over VND 2 million per square meter, signaling an increase in housing prices driven by speculative demand rather than fundamental market needs. Similarly, many real estate brokers are inflating prices by adding extra charges (5-20%) on top of the official selling price, further pushing housing beyond the reach of many potential buyers.
These pricing trends could pose risks to the long-term stability of the market. Mr. Luc cautioned that the high prices could inhibit the sustainable development of the real estate market in the coming years, as they may price out the majority of homebuyers, leading to potential market imbalances.
Looking Ahead
The outlook for Vietnam’s real estate market in 2025 remains cautiously optimistic, as recovery efforts continue and businesses adapt to a changing economic and regulatory environment. However, stakeholders must remain vigilant regarding speculative pricing practices and work towards ensuring that the market’s growth remains inclusive and sustainable.
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