Vietnam’s real estate sector will be shaped by three newly-amended laws from August 1: the Land Law 2024, the Law on Housing 2023, and the Law on Real Estate Business 2023. Industry insiders anticipate that the implementation of these laws will lead to a gradual and sustainable recovery in the country’s real estate market, with noticeable improvements and accelerated growth expected by year’s-end. The recovery may, however, be uneven, and the market is likely to continue facing its share of challenges.

More sought, more bought

Many have been waiting for these amended laws to be approved and come into effect. “Developers will begin addressing regulatory bottlenecks, boosting investor confidence and encouraging the flow of funds from banks into real estate,” Mr. Nguyen Van Dinh, Chairman of the Vietnam Association of Realtors (VARS), predicted. “Real estate brokers and companies will enhance their capabilities, recruit new talent, and update their knowledge to comply with the new legal framework. With these laws coming into effect, the government and local authorities will ramp up efforts to revitalize the market, leading to more confident product launches and heightened marketing activities. By year’s-end, market recovery will become more evident.”

VARS forecasts a 20 per cent increase in the supply of homes for sale over the remainder of 2024 compared to the first half of the year, with a focus on high-end and luxury apartments. Product quality and prices are expected to exhibit a notable recovery, and more low-rise units from large projects nearing completion will also enter the market.

Demand for residential housing will remain strong. Investment demand is projected to recover by around 30 per cent from earlier in the year, targeting emerging markets with significant potential for price increases. This will likely drive a 20 per cent rise in transaction volumes compared to the first half, as supply is expected to surge towards the end of the year, largely driven by the apartment segment.

Liquidity in the secondary market is also set to improve, with the most significant changes expected towards year’s-end as regulatory and business efforts take effect. The number of viewings and purchases is anticipated to rise. With an increase in primary supply, particularly high-end apartments, projects priced around VND40 million ($1,569) per sq m may see price increases of VND100-300 million ($3,920 - $11,765) per transaction.

Transactions and prices for villas, townhouses, and shophouses are also expected to see widespread improvements, especially in the secondary market, driven by earlier recovery efforts and investor expectations for higher returns. Land plots are moving away from price lows and regaining their status as a preferred investment channel. However, investors are focusing on auctioned land, subdivided plots, and areas with complete infrastructure and reasonable prices.

Supply is also expected to improve in resort property and condotels, with more companies bravely launching new products, though in limited quantities. Many projects are still on hold due to legal and financial issues. The main supply will be high-rise properties valued at up to VND5 billion ($196,080). Condotels are expected to lead the market by offering stable returns with relatively low investment requirements, especially as the tourism industry grows and the legal framework improves further. Conversely, resort villas and shophouses may face competition from secondary market offerings.

Additionally, the social housing segment is expected to turn around, with new regulations aimed at easing the challenges facing both businesses and buyers, along with a revised VND120 trillion ($4.71 billion) credit package for social housing that offers better terms.

As the market continues to recover, participants are likely to accelerate their entry and business plans. “With the implementation of the new laws, existing issues and conflicts are expected to be resolved, allowing numerous stalled projects to resume,” Mr. Nguyen Quoc Hiep, Chairman of GP.Invest, believes. “All investors and homebuyers are optimistic that housing supply will improve.”

‘Filtering’ market participants

“With the newly-amended laws now in effect, longstanding obstacles regarding site clearance and compensation are expected to be addressed more efficiently,” he continued. “Updated regulations ensure fairer compensation, which should facilitate these processes. Additionally, the methods for executing projects are now clearly outlined. Future projects will predominantly rely on bidding and auctions for land use rights, which will improve conditions for housing projects and enhance their development potential. New resolutions from the National Assembly, such as converting different land types into residential land, are anticipated to significantly boost the supply of real estate products.”

In regard to the social housing program, Mr. Hiep anticipates that new regulations will address procedural delays and benefit both businesses and customers. This is expected to lead to an increase in social housing development, thereby boosting the supply of affordable housing and controlling price surges. The real estate market is therefore well-positioned for recovery.

However, Mr. Nguyen Quoc Anh, Deputy CEO at Batdongsan.com.vn, part of the PropertyGuru Group, noted that the market will continue to face challenges in the immediate future. “The market is currently in a consolidation phase, with some signs of recovery in specific segments, suggesting that an acceleration phase may be approaching,” he said. “Despite this, challenges remain, with rising real estate credit debt and ongoing issues with bonds and bad debts. Additionally, even though there is a shortage of new supply, the high inventory of listed real estate companies highlights a mismatch between available products and actual market demand.”

From another perspective, many believe that the newly-amended laws, while having a beneficial impact on the market, will also act as a “filter” eliminating less-competent market participants.

“The new regulations will tighten real estate brokerage practices, removing those that are less committed,” according to Mr. Le Dinh Chung, CEO of SGO Homes. “Specifically, regulations on land funds for commercial housing projects and the removal of fixed land price frameworks will gradually eliminate weaker investors lacking capacity, financial resources, or sufficient land. Many companies that succeeded in other fields but entered real estate with high profit expectations have faced disappointment due to these expectations remaining unmet.”

Currently, he continued, many businesses face a dilemma in that they risk failure regardless of their actions due to difficulties in predicting land use costs. With the newly-amended laws taking effect, higher land prices are anticipated, leading to increased land use costs. This will result in higher site clearance compensation for residents and greater financial pressure on businesses.

Mr. Chung also indicated that the new “playing field” will favor well-organized investors with substantial land holdings, financial resources, and the capability to develop large-scale urban projects with comprehensive infrastructure and amenities. These investors will be able to leverage their advantages to reduce investment costs. Additionally, the option for bank guarantees will help mitigate risks and costs for future homebuyers.

Many believe that the future state of the market and the health of real estate companies will greatly depend on the effectiveness of the new legal regulations. They also hope these will not lead to a scenario where stakeholders miss opportunities by delaying action or face difficulties in proceeding due to unforeseen complications.