VIETNAM REAL ESTATE: HO CHI MINH CITY’S RECENT REBOUND
After a tumultuous period of contraction, Ho Chi Minh City’s real estate market is finally finding its footing. Recent data from the Ho Chi Minh City Statistics Office reveals that real estate revenues in the city have surged to VND 173 trillion (approximately $7.2 billion) in the first eight months of 2024, marking a 6.1% increase year-on-year. This rebound comes as a much-needed boost to an industry that had been navigating through one of its most challenging stretches in recent memory.
Signs of Recovery After a Rocky 2023
The positive trajectory seen so far in 2024 stands in stark contrast to last year’s negative performance. Between mid-2022 and the first quarter of 2023, the real estate sector in Ho Chi Minh City was in the red, with revenue growth declining by as much as 16.2% at the low point. It wasn’t until the second quarter of 2023 that we saw the pace of decline start to slow, with a negative growth rate of 11.5%. The city’s property market bottomed out by the year’s end, still posting a contraction of 6.38%. But since the start of 2024, the tide has turned. The first quarter saw modest growth at 2.51%, followed by an improvement to 2.94% in the second quarter, culminating in the latest 6.1% uptick.
Foreign Investment: A Key Driver of Growth
Fueling this recovery is a notable resurgence in foreign investment. In the first eight months of 2024, foreign direct investment (FDI) into Vietnam’s real estate sector hit $2.4 billion. This influx of capital underscores the renewed confidence international investors have in Vietnam’s long-term real estate prospects. However, it’s not just about the inflow of capital—it’s about market dynamism. During the same period, 3,155 new real estate companies were established across the country, while 814 firms exited the market, illustrating both the sector’s resilience and the ongoing consolidation among less competitive players.
Interestingly, 958 new companies received operational licenses with a total registered capital of VND 37.4 trillion ($1.55 billion), which reflects a slight decline of 2.3% compared to the same period in 2023. The slight dip, though worth noting, doesn’t overshadow the broader story: the sector is stabilizing, but not without pruning its weakest participants.
Credit Growth Signals Market Health
Another important barometer of the real estate market’s health is credit growth. According to Nguyen Duc Lenh, Deputy Director of the State Bank of Vietnam’s Ho Chi Minh City branch, credit in the city rose by 3.9% over the first seven months of 2024. Of particular note is the performance of real estate lending, which saw a 5.5% increase, with total outstanding loans exceeding VND 1 quadrillion ($42 billion).
Housing loans remain the largest segment, comprising 57% of total real estate lending. This robust expansion in credit, particularly in the residential sector, indicates that both consumers and investors are regaining the confidence to borrow, whether it’s for purchasing homes or financing new projects.
Policy Shifts and Market Adaptation
It is important to highlight that this recovery is not happening in a vacuum. Government policies aimed at stabilizing the property market are beginning to bear fruit. Interest rates have been lowered, making borrowing more affordable for both businesses and consumers, while access to capital has improved. The Ho Chi Minh City Real Estate Association (HoREA) notes that market conditions have been on the mend since August, supported by the introduction of new laws governing land, housing, and real estate business practices. These legal reforms are poised to clear long-standing regulatory bottlenecks, especially for approximately 1,000 stalled projects across the country, enabling smoother access to credit and a more streamlined approval process for new developments.
These regulatory changes, paired with more favorable financing conditions, are expected to keep the market on a solid recovery path. Yet, as the market rights itself, it’s also becoming increasingly clear that not all players will survive the shakeout. The companies that thrive in this environment will be the ones that can adapt, restructure, and maintain financial discipline.
Restructuring and Price Adjustments: Market Evolution in Motion
The next phase of the market’s recovery will likely be driven by real estate developers adjusting their strategies. Many are already restructuring their product portfolios and adjusting property prices to better align with current market realities. This restructuring effort is seen as a necessary evolution to stimulate demand and restore market liquidity. According to HoREA, both supply and demand are expected to rise by 20-30% in the second half of the year compared to the first half.
Liquidity is also anticipated to improve as the combined impact of regulatory easing, strategic adjustments, and increasing credit flows materialize. However, it will likely take until the end of 2024 for the full benefits of these shifts to be realized, particularly as the efforts of both businesses and government authorities gain traction.
What This Means for Investors
Ho Chi Minh City’s real estate market is continuing a period of cautious optimism. On the one hand, the market is stabilizing, credit is flowing, and foreign capital is returning. On the other hand, the sector is still in the early stages of its recovery, and challenges remain. Investors need to keep an eye on several key factors: how developers are adjusting their business models, the continued impact of government reforms, and whether liquidity can improve at a pace that keeps up with rising demand.
Get professional insights in Vietnam properties, residential leasing and asset management services by Arcadia Consulting in Vietnam, reach our Residential Services team at rs@arcadia-consult.com.vn.
