Since mid-2022, the low liquidity state of the residential real estate market has been on the front page due to the credit crunch, bond crisis and high interest rates. As the world economy become more and more uncertain, Ho Chi Minh City is also facing its share of negative news on the market.
In the first 6 months of 2023, Vietnam attracted about 13.43 billion USD in FDI, equaling 95.7% over the same period and increasing 3 percentage points compared to the first 5 months of the year. In which, real estate ranked third with a total registered capital of 1.53 billion USD, down 51.5% over the same period last year (3.15 billion USD). GDP in the first 6 months of 2023 reached 3.72%, just higher than the growth rate of 1.74% in the first 6 months of 2020, in the period 2011 - 2023.
However, positive signs have emerged, making a strong case for us to expect that real estate investment flows will improve in the period of 2024-2026, thanks to a series of initiatives from the Government to build infrastructure, adjust management policies for the recovery and socio-economic development of the country.
According to the Ministry of Transport, the road network planning to 2030 will prioritize the inclusion of high-speed highways in the investment portfolio, to eventually form a network of 5,000 km of road.
Highlighted positive signals are the inauguration ceremony of Dau Giay - Phan Thiet expressway with a total investment of 12.5 trillion VND, the groundbreaking ceremony of Ring Road 3 with a total investment of 75 trillion VND and the restart of the Ben Expressway construction Ben Luc - Long Thanh (after 4 years of stopping construction) with a total investment of 31 trillion VND. The Long Thanh airport plan is expected to serve 100 million passengers a year and transport 5 million tons of cargo a year, 2.5 times the current capacity of Singapore Airlines.
The Government has also issued legal updates to remove obstacles and drive the growth of the real estate market. Up to now, the Ministry of Construction and the Prime Minister's working group have processed and resolved 71 documents reporting difficulties, problems and recommendations from localities, businesses, associations, and people related to 121 projects across the country. At the same time, promulgated Decrees No. 35/2023/ND-CP, Decree No. 10/2023/ND-CP, Decision No. 1123/2023/QD-NHNN, Circular No. 11/2022/TT-NHNN amending and supplementing a number of articles in Decrees in the field of state management of the Ministry of Construction, guiding the implementation of the Land Law and regulations on interest rates and bank guarantees. This shows positive signs for the recovery of the real estate market and reinforces Vietnam’s position as one of the most potential markets for investment in the region.
In the period of 2022 – 1H 2023, the foreign real estate investment sector of Vietnam has attracted a lot of attention as transaction opportunities started to appear. The North of Vietnam is a vibrant area of the investment market during this period, with a total investment value of 1.1 billion USD; Meanwhile, the Southern region also received 760 million USD. Looking more closely at the proportion, the capital market in Vietnam is most focused on the housing market, followed by commercial industrial and non-industrial properties.
The South in recent years has not attracted as many large manufacturers as the North, but the investor market is diversified, with transaction types including new project development, projects in progress, etc. The process of developing and purchasing projects has been operating stably. In addition to key economic zones, peripheral and remote areas are also attractive to investors.
Real estate always goes through four stages before forming a new cycle. The stages can be described as follows: Recovery, Growth, Fever, and Recession. In the past few months, Vietnam seems to be going through a quiet period. This state however can also be viewed optimistically that the real estate market is going through a “detoxing” period to become more sustainable and healthier.
Looking back at Vietnam's 30-year journey of market development, the economic foundation tended to gain strength after each recession and crisis. The number of foreign investors coming to Vietnam has increased in both quantity and scale after each frozen period and domestic investors has also been constantly growing and expanding their investment portfolio.
Cushman & Wakefield forecasts that banks will continue to tighten lending to ensure capital risk reduction. While this is not exactly positive, we do think a stricter and more prudent lending environment will create a safe and long-term investment environment that will support macroeconomic stability. Therefore, we believe that when the market overcomes the depression and recovers, there will be the participation of many large global investment organizations in the Vietnam real estate market in the period 2024 - 2026. This is also the time when the market is expected to grow.
While we have recorded some good signals in the licensing process for a number of projects, Cushman & Wakefield acknowledges that there are still many projects delayed in the legal approval process. For more real estate investment activities to take place in the market, Vietnam will need to achieve a higher level of transparency, better urban planning as well as a stronger legal framework to attract foreign investors. Once the regulatory review is completed, we expect supply growth to be able to meet demand, and the market will be more transparent and efficient for both domestic and foreign investors.
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