As legal bottlenecks, lack of capital access, and challenges in raising capital from corporate bonds are major issues that have hindered the development of Vietnam’s real estate market, experts suggested 2023 would be a turning point to address these shortcomings.
|Locals looking at a property project. Photo: Tieu Thuy|
Addressing supply-demand imbalance
The year 2022 proved to be a dismal period for the real estate market, as changes in legal policies and the tightening of bank credit have almost frozen the market.
Property developers, large or small, were forced to undergo restructuring to cut costs or postpone investment and construction activities. Others have put their plans to issue shares on hold, some even having to borrow capital outside the banking system at very high-interest rates to stay afloat.
The real estate market entered a period of depression unprecedented in the last five years, with a large inventory volume and a sharp drop in liquidity.
But even when the market was at its lowest point in years, there remained a clear supply–demand imbalance, especially the low- and middle-income groups' lack of affordable housing projects.
In addition, house prices have been steadily rising for years, with many in the luxury segment of VND500 million (US$21,200) – VND1 billion ($42,400) per square meter.
Therefore, for the market to recover and develop by 2023, experts called for continuing market restructuring by diversifying products, especially affordable housing, and addressing the mismatch between supply and demand.
This is a particularly urgent issue, as the market currently has a surplus of over 70 million square meters for middle and upper-class clients, while affordable products and social housing projects are in short supply.
“Specific and comprehensive solutions are needed to solve the problem of supply-demand mismatch and lack of affordable housing for low-income people. It is necessary to implement a long-term national housing program, accelerate the amendment of relevant laws and regulations, and increase the land portfolio for social housing,” Deputy Director of Research & Development (R&D) Department of the DKRA Group Vo Hong Thang said.
Besides, many think that the State Bank's move to expand the credit room in 2022 by 1.5-2 percentage points will inject much-needed capital into the economy during the remainder of 2022 and early 2023.
“The new credit room would allow investors and homebuyers to continue to access credit sources for affordable housing projects. However, it is unlikely to expect the real estate market to recover in early 2023, and the process may only kick off from the third quarter onwards,” Thang added.
Amid unfavorable domestic and international environments, it is expected that the market will continue to face low liquidity issues for the time being. Real estate expert Tran Khanh Quang suggested both property firms and real estate agencies are expected to continue to adapt to a new situation, and failure to do so would result in a market exit.
“But the market trend in 2023 will focus on affordable housing products and meet the actual needs of customers,” he added.
Expert Nguyen Van Duc called for drastic action from the Government and authorities in provinces/cities to properly address shortcomings in the market, as most investors are still concerned over the lack of capital access, credit tightening, and legal bottlenecks.
“After a long gloomy period, the market has seen positive signals regarding macroeconomic conditions, investment shift, and regulatory institutions. That is an important premise for the market to regain the confidence of buyers and investors. In recent times, short-term investors have withdrawn from the market, and those who stay for a long-term gain would focus on commercial housing projects that meet real needs, therefore, they will be the least affected by market turbulence," said Duc.
Looking forward to the "bright spot"
Despite challenges in 2022, the crisis scenario many feared for the market as it was 10 years ago did not happen.
This was thanks to the reasonable fiscal policies from the Government to contain inflation and support the recovery of the real estate market.
Experts are optimistic about the adaptability of Vietnamese enterprises to cope with the situation and the Government's efforts.
In the coming time, with the impetus from foreign capital flows and the Government's stable regulatory policies, the market is expected to gradually recover and thrive.
"In 2023, we will be in a stable macroeconomic situation, with GDP growth above 7% and inflation below 4%; legal bottlenecks will be gradually eliminated when the revised Land Law and Housing Law come into force; real estate bond issues are being addressed; and investors would once again take advantage of the medium- and long-term investment opportunities.
This will be the pivotal year to remove obstacles and backlogs to help the market recover in the coming years,” said DKRA Group Deputy Director Thang.
Echoing Thang’s view, Deputy General Director of Eco Real Estate Company Nguyen Tan Viet suggested real estate enterprises would have a completely different mindset in 2023 and be better prepared to deal with the situation.
“All the legal issues are set to be resolved in 2023. Besides, a new credit room will drive the market forward. With long-term investment in mind, investors are set to jump in the market once they see the positive signals and products suitable to their needs,” Viet added.
“The real estate market will heat up when the new credit room kicks in. Following the Government’s action to restore market order, many could expect a more quality, transparent and healthy business environment. In the medium and long term, the finalization of laws related to the real estate market would give a brighter outlook to the market and boost investor confidence,” Chairman of Vietnam Association of Realtors, Nguyen Van Dinh
“There remains high hope for the real estate market in 2023 after drastic actions of the Government, especially in segments of real estate tourism, industrial parks, and retail. Once the Land Law and Law on Real Estate Business are finalized, they would provide opportunities for investors to come back to the market,” Economist Vo Tri Thanh