RISING PRICES, DIPPING SALES: VIETNAM’S REAL ESTATE FACES A SPLIT REALITY IN Q2 2024
Vietnam’s real estate market is at a critical crossroads in Q2 2024. While residential transactions plummet by 30%, weighed down by soaring prices and cautious buyer sentiment, land deals have surged back into the spotlight with a remarkable 28% growth. The stark contrast between these two sectors underscores the complex dynamics at play in the post-pandemic economic landscape. Suburban land plots are becoming the new battleground for investors looking to capitalize on regulatory reforms and longer-term growth potential.
Overview: Residential Market Declines, Land Transactions Rebound
The Vietnamese housing market experienced a notable contraction in Q2 2024, with total residential transactions—both apartments and individual houses—falling by 30% compared to the beginning of the year, according to data from the Ministry of Construction. This decline is attributed to high prices and buyer hesitation, as many potential buyers adopted a wait-and-see approach. However, in contrast to the housing market downturn, land transactions saw a resurgence, with a sharp increase of 28% compared to Q1.
Key Data Points
According to the latest report from 60 out of 63 provincial construction departments, Q2 recorded 25,885 successful transactions in apartments and individual houses, while land transactions totaled 124,991. This represents a 27.8% drop in residential transactions compared to Q1 2024 and an 87.08% performance relative to the same period in 2023. In contrast, land transactions showed more resilience, increasing by 127.9% quarter-on-quarter and 185.8% year-on-year.
Housing Market Sentiment Weakens as Prices Rise
The apartment market in Hanoi has notably cooled since mid-Q2, based on data from Batdongsan, a leading real estate listing platform. Buyer interest plateaued in March and April, with a 9% drop in new property listings. According to Mr Nguyen Van Dinh, Chairman of the Vietnam Association of Real Estate Brokers, the decline in interest is partially due to a reduction in “FOMO” (fear of missing out) sentiment among buyers. Concurrently, apartment prices have remained elevated, causing many buyers to hold off in anticipation of potential market corrections.
Apartment prices saw increases of 5-6.5% in Q2 compared to the previous quarter. Several long-established projects reported significant year-on-year price growth, with Royal City up 33%, My Dinh Song Da – Sudico rising by 32%, and Vinhomes West Point increasing by 28%. Even prices in Nam Trung Yen’s resettlement area grew by 20%. New offerings in Hanoi remained concentrated in the Tay Mo area of Nam Tu Liem District, with prices starting at VND 55 million per square meter, while lower-priced units under VND 55 million per square meter were primarily found in Hoai Duc and Ha Dong districts.
Despite the overall price surge, the Ministry of Construction has observed that this upward trend may be short-lived, as price growth began to stabilize toward the end of Q2.
Challenges in the Housing Market
High housing prices, coupled with widening disparities between property costs and income levels, have also slowed down mortgage demand. Citing data from the State Bank of Vietnam, the Ministry of Construction noted that credit growth in the first half of 2024 reached just 4.45%, a relatively low rate compared to previous years, largely due to ongoing economic difficulties.
Contrasting Surge in Land Transactions
While the residential market struggled, the land market saw an uptick in activity. According to Mr Nguyen Van Dinh, demand for land plots priced under VND 2 billion surged, driven by the implementation of three new real estate laws that took effect on August 1, 2024. These laws have tightened regulations on land subdivision and sales, leading to a spike in land auction applications, particularly in suburban Hanoi districts.
Batdongsan’s data also indicated a recovery in land interest, which had reached a low point in 2023. Dong Anh led the rebound with a 104% increase in interest, followed by Quoc Oai (101%), Gia Lam (95%), Hoai Duc (79%), and Thach That (48%).
New Project Approvals and Social Housing Initiatives
In Q2 2024, the Ministry reported 19 new commercial housing projects were approved, comprising roughly 10,230 units—a number that matches Q1’s figures and reflects a 26% year-on-year increase. In terms of completed projects, nine developments totaling around 5,005 units were finished in Q2, representing 90% of Q1’s volume and 128% of the same period in 2023.
Social housing projects also saw some movement. Out of 63 provinces, 53 reported new social housing developments, including nine new projects in Q2. Three projects, totaling 1,120 units, were completed, and five projects with 2,876 units received investment approval. One additional project, comprising 395 units, broke ground during the quarter.
Southern Vietnam Sees New Project Activity Amid Legal Reforms
After a prolonged period of inactivity, real estate development in Southern Vietnam began to pick up pace in early August, spurred by positive signals from recent legal reforms.
For example, Gamuda Land started accepting reservations for its low-rise development, The Meadow, in Binh Chanh District. The 5-hectare project includes 212 townhouses and villas and is one of the few low-rise projects to launch in Ho Chi Minh City this year. Meanwhile, Quoc Cuong Gia Lai resumed taking reservations for 400 units at its Lavida Plus project in District 7, with expected prices around VND 45 million per square meter ahead of its official sales launch in September.
Nam Long Group also announced plans to launch a new phase of high-rise apartments at its Mizuki Park development in Binh Chanh in September. Elsewhere, existing projects in Thu Duc City are preparing to release new inventory in late August.
In comparison to Ho Chi Minh City, Binh Duong’s market appears more active, with several projects scheduled for launch in August. For instance, Bcons Group is set to introduce Bcons Avenue with 528 units priced between VND 35-42 million per square meter, while Phu Dong Group is marketing 780 units at Phu Dong SkyOne starting from VND 32 million per square meter. C-Holdings also launched The Felix, with prices ranging from VND 33-40 million per square meter.
The first week of August also saw the commencement of two new high-rise projects in Binh Duong. One is CapitaLand Development’s Orchard Hill in the Sycamore Urban Area, featuring 774 units priced above VND 50 million per square meter. The other, TT AVIO, is a 2,000-unit development in Di An City, backed by a joint venture between Cosmos Initia, TT Capital, and Koterasu Group, with units priced below VND 2 billion each.
Further west, Long An Province also saw new development activity with the groundbreaking of the 60-hectare An Huy My Viet residential area in Duc Hoa District, which will offer nearly 2,500 townhouses, shophouses, and villas. In Can Tho, KITA Invest began work on Stella Icon, a VND 440 billion project that will provide 294 apartments priced under VND 40 million per square meter, with sales expected to begin in Q4.
Outlook: Recovery Still in Progress
Despite some positive signs in the land market, Vietnam’s real estate sector as a whole has not fully recovered, despite regulatory efforts to address market difficulties. The Ministry of Construction remains committed to continuing these efforts, particularly for projects with strong liquidity potential, to boost supply and facilitate a clearer market turnaround in the latter half of the year. Local governments have also been urged to resolve issues plaguing long-delayed or stagnant projects.
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.
