Vietnam Real Estate Market In 2024 Shows Signs Of Recovery
1,300 Vietnamese real estate companies folded in last year, according to Vietnam Express. This time, Hanoi Times paints an optimistic outlook for 2024 albeit for the housing market. There will be differences in the timing of the recovery across segments.
Nearly 50% of respondents in Vietnam’s real estate industry believe the market will recover in the second half of 2024, according to Vietnam Report’s latest survey. This is a stark contrast to Vietnam Express’ earlier report that some 1,300 real estate companies went bankrupt in 2023, an 8% increase from 2022, according to the General Statistics Office.
Companies that suspended business for a limited time increased by 21% compared to 2022, while companies waiting to complete procedures to be disbanded increased by 29%. On average, 107 businesses go bankrupt every month, while the number of new businesses being established dropped by 45% compared to 2022.
Vietnam’s real estate market has been in hot water since 2022, and the situation persisted until now, even with assistance from the government. Experts said there were issues regarding the law, land handovers, pricing and capital, among others. The precarious real estate scene caused several projects to be delayed, incurring losses for construction and material businesses.
Statistics from the Ministry of Construction revealed the total revenue of several companies under the ministry, including HUD, Coma and Vicem, decreased by 16% compared to 2022. Their profit dipped by 66% compared to 2022, to VND1.38 trillion ($56.86 million).
In a report sent to the Economic Commission, the construction ministry said the real estate market still harbours instabilities, stemming from the risk of a crash, lack of supply and inappropriate goods structure, among other factors.
Vietnam Report CEO Vu Dang Vinh said companies expect three factors to boost their performance in 2024: gradual economic recovery, lower interest rates, and successful application of digital transformation in management and operations. Real estate experts and businesses agree that the real estate market will show more positive signs in 2024 than in 2023, but there will be differentiation among different segments, according to the survey.
The report highlighted office leasing and industrial real estate segments are benefiting from favourable factors such as geographical location, public investment in infrastructure, strong FDI inflows due to the impact of newly signed free trade agreements, the “China+1” strategy, stable economic-political environment, and competitive advantage due to low industrial land prices compared to other countries in the region.
These factors drive development and investment attractiveness of the office leasing and industrial real estate segments. Some 34.5% of companies predict that the industrial real estate segment will thrive in the first half of 2024. Regarding the office leasing market, about 35.7% of respondents forecast a recovery in the second half of 2024.
Residential real estate, high-end apartments and resorts will experience a slower recovery than other segments due to oversupply after a period of rapid growth and people’s caution in investing in these segments, according to the report.
The focus in these segments is on the vision of building one million social housing units between 2021 and 2030, along with planning for land reserves, incentives for investors, and adjustments to sales policies. This will be an opportunity to increase the supply of housing and provide access to social housing for people on low incomes, the report stresses.
The Vietnam Report also examines the state of the real estate market in 2023, a challenging year for the industry as global and Vietnamese economic growth slowed, affecting people’s incomes and reducing the number of successful real estate transactions. By the end of 2023, the number of dissolved real estate companies reached 1,286, an increase of 7.7% from 2022, according to data from the General Statistics Office.
3,705 real estate companies that temporarily suspended operations, an increase of 47.4% compared to 2022. In 2023, 41.2% and 16.1% of the businesses experienced revenue and profit declines of less than 25%, respectively. In addition, most of these companies will trim their payroll by 42.9% in 2023.
Many real estate companies surveyed said the three most important drivers of their business results were the company’s reputation and brand in the market, a skilled and experienced workforce with high discipline, and efficient cost reduction and utilisation measures, Vinh said.
As a result, he said, leveraging their existing position and reputation, along with cost-cutting measures, has helped real estate companies maintain operations, with hopes for a more vibrant market in the current year.
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