Real-Estate Market in Vietnam in 2023: Challenges and Opportunities for Renting and Leasing

The COVID-19 pandemic significantly impacted Vietnam’s real estate market, leading to a dynamic shift within the industry. As the situation stabilized and vaccination efforts progressed, Vietnam gradually began to recover. The government implemented measures to stimulate economic growth, including incentives for the real estate sector. This, combined with increased consumer confidence, has contributed to the current economic revival.

As the country adapts to the “new normal,” renting and leasing present both challenges and opportunities. This article explores the state of Vietnam’s real estate market in 2023, highlighting obstacles faced by developers and investors and potential avenues for growth and success.

The real estate market in Vietnam in 2023 is characterized by significant changes brought about by the pandemic. COVID-19 impacted homebuyers’ confidence, resulting in sales downturn. Overleveraged real estate firms faced a liquidity crisis, resorting to Vietnam’s bond market and causing a significant increase in bond issuances. By the end of 2021, Vietnam’s local currency corporate bonds connected to the real estate market had more than doubled to US$26 billion.

The shift towards remote working and virtual property viewings has majorly impacted the industry. Landlords, particularly those with commercial properties, have suffered from decreased demand due to remote work, leading to an oversupply of commercial spaces, lower occupancy rates, and reduced rental income. The uncertain nature of the pandemic has created challenges for long-term leases, causing property developers to be cautious and resulting in a slowdown in construction and overall real estate activities.

Despite the challenges, the pandemic has also presented unique opportunities in 2023. The demand for high-quality residences has increased as remote work becomes more prevalent. Developers and investors can capitalize on this trend by developing high-end properties with modern amenities like co-working spaces, fitness centers, and green spaces.

The pandemic has also underscored the importance of digitization and virtual viewings in the real estate market. Companies that invest in virtual viewings and online marketing strategies gain a competitive edge. This trend is likely to persist as remote viewings become more commonplace.

China’s Evergrande default amplified turmoil in Vietnam’s real estate market, prompting increased scrutiny of the sector. The escalation of conflict between Russia and Ukraine introduced additional challenges, including inflation and a decline in orders for manufactured goods. The European Central Bank and the United States Federal Reserve raising interest rates added further pressure, impacting Vietnam’s currency.

Cracks in Vietnam’s real estate market appeared in 2022 following allegations and arrests. Bond market reforms were subsequently introduced, requiring certification for investors and implementing compulsory credit ratings. The arrest of Truong My Lan and rumors connecting her company to Saigon Commercial Bank caused a temporary bank run, further eroding confidence.

Despite these challenges, foreign firms have opportunities to enter or expand in Vietnam’s real estate market. Recognizable international brands may appeal to cautious consumers, and collaboration with cash-strapped domestic firms could unlock potential.