Vietnam’s Property Sector Poised for Gradual Recovery
Over the last 30 years, Vietnam has transitioned from being one of the poorest global economies to one of the fastest-growing, thanks to its flourishing manufacturing sector and ability to attract strong foreign direct investment.
This in turn buoyed its property market. However, the sector started to go downhill in 2022 when the government cracked down on corporate bond issuance following allegations of illegal activities. Property firms quickly found themselves unable to fulfil their bond payments on time – nearly 2,000 property firms have failed in the first quarter of 2023 alone.
But the worst may be over. The government has been working to sustain investor confidence, implementing decrees that allow issuers to roll over bond maturities by up to two years with investors’ consent, and providing issuers with options to repay outstanding payments with other assets.
There are signs that a gradual recovery is on the way. In the third quarter of 2023, the country recorded 6,000 property transactions, one-and-a-half times more than the previous quarter, data from the Vietnam Association of Realtors revealed. Observers predict the market will recover slowly through 2024, especially if the government policies remain supportive.
The country’s strategic autonomy has also allowed it to boost ties with the United States, which will pave the way for broader bilateral cooperation and deeper economic engagement.
Furthering US-Vietnam Ties a Boost for The Economy
In September, United States President Joe Biden made a state visit to Hanoi. During his two days in Vietnam, Biden met Vietnam’s ruling Communist Party chief Nguyen Phu Trong and struck a comprehensive strategic partnership – elevating Washington to Hanoi's highest diplomatic status alongside China and Russia.
Joined by industry leaders, they spoke about improving collaboration between the tech and semiconductor manufacturing spheres – both in each other’s markets and throughout the Indo-Pacific region.
The business delegation accompanying Biden – which included senior executives from top US tech firms such as Google and Intel – also inked several partnership and investment deals in Vietnam that pertain to key strategic sectors such as AI, cloud computing and new energy.
Biden’s visit is expect to be a “beacon guiding foreign capital into Vietnam’s industrial real estate sector,” said Winston Lee, Director of Special Projects at PropertyGuru. “While the domestic real estate market has faced its share of storms, foreign investments have stood strong, thanks to Vietnam's robust manufacturing sector.”
The Only Way is Up
Indeed, foreign investments have remained robust. In the first nine months of the year, foreign investment inflows into the country rose 2.2 per cent to US$15.91 billion, compared with the same period last year. Analysts expect the visit by President Biden to trigger a surge of foreign investments into Vietnam.
This development bodes well for the industrial real estate sector, with observers predicting that demand for industrial land will rise.
In particular, real estate merger and acquisition (M&A) deals are growing. Statistics from Real Capital Analytics show that the total value of real estate M&A deals in Vietnam last year was US$1.5 billion, the highest since 2018, signalling strong investor confidence.
Major foreign investors have also expressed interest in the Vietnamese housing sector due to the huge demand from local sand investors alike.
As a result, they are keen to secure M&A deals in key locations like Hanoi, Ho Chi Minh City and neighbouring cities like Bac Ninh and Binh Duong due to their proximity to airports and industrial parks. Additionally, they also aim to acquire projects in economic centres such as Hai Phong and tourist hubs like Da Nang and Hoi An.
The road ahead for Vietnam’s property market appears hopeful and there is cause for cautious optimism, noted Lee.
“The Vietnam government's steadfast commitment to restoring investor trust, combined with the recent surge in property transactions, paints a promising picture for the sector. The road to recovery may be gradual, but it's a testament to Vietnam's resilience, offering a glimmer of hope for its property market."
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