Real estate acknowledged as risky venture in short term

Forecasts say that capital sources to support real estate will continue to rise towards 2030, Photo: Dung Minh

According to economic expert Dinh The Hien, although there are many positive forecasts about the macroeconomic situation such as reducing deposit interest rates, stabilising the consumer price index, and exchange rates, the risk of slowed cash flow into real estate is still high.

“The recovery will take place gradually rather than a sudden rush. The domestic economy and consumption need the whole of 2024 to overcome challenges, before coming into 2025 with the implementation of revised laws on Housing and Real Estate Business,” Hien said.

Research data from the Vietnam Association of Real Estate Realtors shows that capital is still a difficulty for many businesses and cash flow into this field is still very risky.

Although corporate bond issuance has improved significantly, the total value of real estate corporate bonds issued cumulatively in the first 11 months of 2023 only exceeded $3.3 billion, about 40 per cent compared to the same period in 2021.

Notably, although deposit interest rates have continuously decreased sharply, the number of individual deposits in banks is still increasing.

According to data from the General Statistics Office, as of December 21, 2023, capital mobilisation by credit institutions had increased by 10.85 per cent compared to the beginning of 2023, double the increase of 5.99 per cent in 2022.

Data from the State Bank of Vietnam shows that by the end of September, total deposits of residents and economic organisations in the banking system rose by nearly 7.28 per cent compared to the beginning of the year and nearly as high as the deposit growth rate of the whole of 2022.

According to real estate expert Nguyen Hoang, the market will recover slowly. “The macroeconomy is the most important factor for the market improvement. It can be seen that it has gradually improved since mid-2023. Therefore, the cash flow will be concentrated on the real estate market when the investors and home-buyers see the improvement.

To increase capital flow into the real estate market, Hoang said competent bodies and developers must switch from high-end to more affordable residences, the most wanted segment of the market.

According to the Ministry of Construction, in Ho Chi Minh City in Q3/2023 alone, more than 90 per cent of new supply was in the high-end segment, with the rest in the luxury segment. There is almost no new supply in the mid-range and affordable segments brought to the market.

According to the Vietnam Institute of Real Estate Market Research (VIRES), it is forecasted that towards 2030, capital sources supporting the real estate market will continue to grow and develop stably thanks to the development of the financial and stock markets.

VIRES forecasts that credit capital would continue to grow by about 10-12 per cent annually to ensure the maintenance of the economic growth rate in the range of 6.8-7.2 per cent.

Real estate credit growth continues to maintain at a level equivalent to the overall credit growth of the economy (about 10-12 per cent per year), it said.

Foreign direct investment capital into the real estate sector in the coming period is forecast to remain stable, with an average growth of about 5-7 per cent per year in the 2021-2030 period.

Along with that, remittances are also an important source of capital for the development of real estate, as Vietnam has always been in the top 11 countries with the largest remittance sources in the world since 2015.

The amount of remittances is forecast to continue to grow steadily from 2023 and maintain an average growth rate of about 7-8 per cent year, expected to reach $30.9 billion by 2030.

It is forecaste that in the future the budget capital source will remain at a modest level of about $500-830 million, double than the current budget capital source. This budget will be served for the development of social housing and housing for low-income individuals at major cities of Hanoi and Ho Chi Minh and through Vietnam Bank for Social Policies, as well as a number of assigned commercial banks.

Industrial property to heat up as it takes on neighbours Although it was the segment achieving the best growth in property in 2023, industrial real estate is forecast to face many uphill battles in 2024.

Real estate market expected to roar back this year The domestic real estate market is believed to have reached the bottom and expected to roar back to life this year thanks to a slew of measures taken by the Government, ministries, agencies and localities.

New capital sources for real estate must be unlocked The real estate market not only needs solutions from credit and corporate bonds, but most importantly, it must open up capital flows from society, from investors and home buyers.