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Analysts expect property market to recover early next year

By Ngoc Diem   October 4, 2023 | 06:16 am GMT+7

Apartment and office towers in the eastern part of Ho Chi Minh City. Photo by VnExpress/Quynh Tran

The property market has overcome its most difficult period and will recover from early 2024, analysts concur.

Speaking at the first ever Autumn Real Estate Forum in Hanoi recently, Can Van Luc, chief economist at state lender BIDV and a member of the National Financial and Monetary Policy Advisory Council, said: "There are more opportunities [now] for the real estate market than challenges because it has overcome the most difficult period."

The central bank has reduced policy interest rates four times this year, leading to lower lending interest rates, and policies have been launched to support businesses and individuals such as debt restructuring and preferential credit for social housing, he said.

Tax breaks have also helped companies overcome cash flow and liquidity difficulties, he said. Tax exemptions, reductions and extensions this year are estimated to be worth VND200 trillion (nearly US$8.5 billion), he said. "These are unprecedented policies for businesses, including those in the real estate sector."

A lot of corporate bonds will fall due in March 2024, but the situation is under control, seems to be the consensus among analysts.

Meanwhile, inflation and interest rates are tending to gradually decrease, creating conditions for the central bank to loosen monetary policy.

By August inflation was at 4.6% and the overnight interest rate had decreased to nearly the level of the beginning of 2021.

The property sector also ranked second in attracting FDI with its US$2 billion accounting for nearly 10% of total inflows.

Nguyen Van Dinh, president of the Vietnam Association of Realtors, said the market has changed for the better.

A number of new projects put properties on sale in the second quarter and there were 3,700 successful transactions, while there had almost been no new supply in the first quarter and only around 1,000 transactions, Dinh said.

Between July and August there were another 5,000 transactions, 70% in the apartment segment. Supply is gradually increasing again mainly from 300 old projects.

Many investors have restructured their products, lowering prices to attract buyers.

Dinh said: "In the beginning of this year many developers and investors stopped launching products because they were afraid no one would buy. But since the third quarter their confidence has returned."

Experts said the signs indicate the market would start recovering at the beginning of 2024. Luc forecast the economy to grow at nearly 6% in the third quarter and 7.5% in the fourth, and the property market to perform better from the beginning of next year.

He believed early 2024 would be a favorable time to make investment decisions as interest rates and land and housing prices are decreasing.

Economist Dinh Trong Thinh said the market would see clear changes from the end of the first quarter and the beginning of the second quarter of 2024 when there is stronger supply of social housing.

He said developers and buyers would focus on affordable housing rather than luxury projects like apartments, villas and resorts to ensure cash flow.

Since the end of 2022 over 400 social housing projects have been under way. One of them, a project to build one million social and workers’ housing units is expected to contribute to the market’s recovery.

According to the Vietnam Real Estate Research Institute, the market will make a V-shaped recovery starting in the middle of the second quarter of 2024.

The supply of apartments is expected to soar by 20-25% annually during the recovery period in 2024-26.

In Hanoi and Ho Chi Minh City, apartment supply during the period will be 70,000-85,000 units a year, equivalent to pre-pandemic levels.

Experts admitted however that the market would continue to face challenges until 2030 since there is no national strategy for the housing market with a long-term vision.

They said long-term challenges include overlaps in policies and legal mechanisms, a resource shortage, inflation and high interest rates, and modest quality of planning, infrastructure, market information, and human resources.