(((you are an experienced corporate business analyst; your task is to draw conclusions on the real estate market of Vietnam based on this information in {} ))) {What direction for the real estate market in 2023?
After more than 2 years of being impacted by COVID-19, the Vietnamese real estate market is facing challenges due to global regulation, causing a general increase of 10-20% in real estate prices. In Vietnam, however, the increase has been higher, ranging from 20-50% in selling prices. This situation presents a difficulty for the Vietnamese real estate market, which is still grappling with various factors.

 

Businesses struggle to lower prices
According to research by VIRAC, the real estate industry has been gloomy since the end of 2022, leading to an increase in unsold properties. This is due to low liquidity caused by credit control measures implemented for real estate. As a result, businesses are forced to implement various solutions such as: offering high discounts to collect cash quickly and pay expenses, particularly outstanding debts.

 

Several businesses have applied high discount rates. For example, Novaland Group has reduced prices by 40%-50% for those who pay with 100% cash. Other companies, including Hung Thinh, Dat Xanh, An Gia, etc. have also implemented preferential sales policies, including discounts and high-profit commitments for investors. Unfortunately, these rescue measures have not yet had any significant effect on businesses.

 

Many real estate businesses apply high discount rates
                      Image 1. Many real estate businesses apply high discount rates
 

Some people assume that policies that offer discounts on high-priced products do not reduce the absolute value of the product. However, in reality, buyers often have to spend more money upfront for each transaction, which can make it less effective for investment purposes.

 

Currently, many customers have paid 15-30% of the contract value and want to transfer quickly due to increasing interest rates. However, numerous businesses are still struggling to solve cash flow problems and are waiting for government support.

 

Why is adjusting selling prices hard in the real estate market?
Despite the ineffectiveness of stimulating demand through attractive discounts, businesses tend to keep or even push prices up. The Vietnam Association of Realtors (VARs) indicates that the market has around 100,000 properties with weak liquidity but high prices, which are not suitable for the majority.

 

According to Dr. Nguyen Van Dinh, the President of VARs, if these 100,000 products were apartments priced at around 2 billion VND, they would be more suitable for the real needs of citizens compared to those priced at 6-7 billion VND.

 

Talkshow "Bright spots in mechanisms and policies for Vietnam's real estate market"
                           Image 2. Talkshow “Bright spots in mechanisms and policies for Vietnam’s real estate market”
The difference between supply and demand is not the only reason why the price structure may decrease. Another reason is collateral. About 70% of a bank’s collateral value is from real estate, so if the selling price goes down, the value of the bank’s collateral will be affected. This could lead to the bank requiring additional funds, which may be difficult to meet currently.

 

Additionally, legal issues affecting many real estate projects are also influencing the business environment, making it difficult to sell even if prices are reduced.

 

On the business side, most of them have their own “F1 – investors”. These investors buy real estate directly from the developer, also known as “F0”. When prices go down, the “F1 people” are affected first, so investors must consider this.

 

The main reason why investors hesitate to reduce prices is due to the basic principle of investing in real estate. Once sold, investors will not have anything left, including potential future profits. Therefore, they prefer to wait for the market to recover rather than reduce selling prices.

 

Businesses can only reduce costs and wait for the market to show signs of improvement. There are not many solutions when the problem is related to global consumer demand. The current situation suggests that the real estate business will not be bright, at least in the first half of 2023.

 

Proposed policies to aid the real estate market
Based on real estate reports from VIRAC, the market should continue to prioritize transparency and professionalism. Moreover, several market research units have suggested that Decrees and Circulars need to be amended soon within the government’s competence, as well as in ministries, branches, and localities. This includes paying special attention to project transfer, land rent determination, valuation, compensation, site clearance, and social housing planning.

 

It is suggested that investors reconsider solutions such as reducing selling prices, accepting loss-stop sales, or selling off assets to pay off debt. This proposal has been made by the government and the state bank aimed at removing troubles for the real estate market. The state does not necessarily use budget money to support, but instead uses policy mechanisms and reciprocal capital, focusing on priming capital for social housing.

 

Furthermore, the Prime Minister has emphasized the need to balance interest rates and inflation, monetary and fiscal policies, growth and inflation, and the domestic and foreign markets when it comes to credit policy.

 

Proposed policies to remove difficulties for the real estate market
                             Image 3. Proposed policies to remove difficulties for the real estate market
The Ministry of Construction has proposed several solutions to the government to help open up real estate credit capital. These include flexibly and synchronously operating monetary policy tools, and opening up credit capital flows for socioeconomic development. Additionally, perfect policies are crucial to mobilize maximum financial resources at home and abroad for housing and the market.

 

One considered solution is loosening the appropriate “credit room” to support the economy in 2023 and the following years. This would help businesses, investors, and homebuyers access credit more easily.

 

Furthermore, the focus should be on projects, feasible loan options, customers with financial potential, and the ability to repay debts in full and on time. It is essential to prioritize lending to social housing projects and consider debt rescheduling and interest rate reduction to support the real estate industry.

 

Businesses have proposed that the government back up the mechanism. Specifically, the government and the state bank could issue regulations to allow subsidiary banks to expand, postpone, or maintain the same debt group for real estate for 2-3 years. This would help businesses have time to wait for the market recovery and upcoming legal changes.

 

Opportunities for the real estate market
Policies such as the Law on Housing and the Law on Business are expected to be submitted to the National Assembly in May 2023 and passed in October 2023, along with the Land Law. These changes will be essential in navigating the real estate market until 2030.

 

The draft Land Law has amended and supplemented 184 articles, with 41 new articles being added and 8 articles being discarded, leaving only 28 articles unchanged. This shows that the upcoming Law changes will be significant.

 

Changes in policy and caution of real estate investors
                                                      Image 4. Changes in policy and caution of real estate investors
 

The Chairman of the Vietnam Real Estate Brokerage Council has predicted that the real estate market will receive a positive signal in the first quarter of 2023 when implementing synchronous solutions. In the second quarter of 2023, the government will focus on amending and addressing issues in investment procedures for group housing projects, accommodation houses, and the renovation of old apartment buildings.

 

However, investors need to continuously update their understanding of the business environment, real demand, and development potential and have the ability to deploy the projects they undertake. With many inadequacies in the real estate market, businesses should closely observe real estate report data from 2022. Then they can make more objective and comprehensive decisions for their next steps.

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