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6 challenges of Vietnam real estate market 2020

According to the Vietnam Real Estate Association report, the real estate market witnessed a stable fluctuation in 2019. Despite the stable trend, the Vietnam market still had 6 challenges in 2020, begins with a decrease in the supply of apartment

Supply declines

Vietnam’s real estate market witnessed a sharp decline in both supply and transaction volume. Statistics show that the supply in 2019 only reaches 107.284 products, equivalent to 61.5% compared to 2018. The transaction volume reaches 72.828 products, equivalent to 64.7 compared to 2018.

In general, apartment price stays stable in 2018 and the first half of 2019, but rise significantly in the latest 2019 due to the scarcity of new products. At the end of 2019, the price of medium and high-end apartments in Hanoi has increased by 5% compared to the 4th quarter of 2018.

Transaction volume reduction

Secondly, compared to 2018, the transaction volume has decreased rapidly as a result of declining supply and the surge of real estate prices. The other reasons are credit tightening lending for real estate businesses reduced transactions from secondary and speculative investors.

In particular, the main cause identified is the review and inspection of compliance with the law on investment, construction, land … in the project.

High demands due to urbanization

Vietnam is one of the countries with the fastest urbanization rate in the world. The immigrants to big cities such as Hanoi or Ho Chi Minh creates a significant demand for apartments. Although, the scarcity is not a result of the lack of space for development but the temporary suspension of development from the government.

Therefore, the strong price increase is difficult to be accepted by the market in some scenarios: speculation is falling, the high segment has a price higher than VND 50 million / m2 with a low absorption rate (especially projects pushing prices with large amplitude).

The difference between supply and demand has a strong expression. 

In big cities like Hanoi and Ho Chi Minh City, there is an increasing scarcity of affordable, affordable housing for low-income people. The high-end apartment segment thrived, suitable for foreign customers but limited the number of apartments in each project for this customer group.

In some localities, the policy of developing urban housing for professionals, workers and displaced workers have not been as interested in the policy of developing land-plot projects.

The demand for the year is always high. 

Especially the projects with full legal, fully invested technical infrastructure, services and implemented by reputable developers, appropriate prices … The absorption rate usually reaches 70-80 %. This is a bright spot, a strong point of Vietnam’s real estate market and a positive factor that still attracts investors in 2020.

Sixthly, land prices in some localities have been pushed up too high.

This is faster than the rate of economic development and urban infrastructure has created virtual prices. This phenomenon led to consequences: state agencies adjusted the land tax, people demanded an increase in compensation for site clearance, leading to a decline in urban development investment activities. Virtual prices cause investors to leave the market, depleting local economic development and the real estate market.

 

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