Time needed for real estate changes to take effect

The real estate market has shown the first signs of recovery recently. Will the market be booming again sooner rather than later?

Vo Hong Thang, investment director at DKRA Group

In the first half of 2024, the real estate market recorded significant signs of recovery compared to the 2022-2023 period, but fragmented across segments. The majority of transactions focus mainly on affordable residential real estate to serve the increasing housing demand of end-users in big cities, with convenient locations connecting to the centre, with full legality and clear construction progress.

Data for the first six months of the year in the residential real estate market in Ho Chi Minh City and surrounding areas recorded growth in both supply and consumption in the apartment, land, and town house and villa segments.

The resort real estate market has not recorded signs of resuming in the short term. Although supply has increased in some segments of villas, town houses and resort shophouses, consumption is quite modest at less than 10 units per month for the entire market.

Do you think that factors of the market cycle, the government’s policies, and amended laws are enough for the market to recover in the near future?

Regulations on the Land Law, Housing Law and Real Estate Business Law taking effect from August 1 are expected to bring many positive changes to the market in the near future.

However, policies still need time for being absorbed, so in the short term, I think the market will not have significant changes. But in the medium and long term, the laws will increase market transparency, protect the rights of home buyers and promote market recovery.

From a market perspective, the recovery can be seen more clearly in Ho Chi Minh City, Hanoi, and Danang, and in existing new urban areas that are high populated and full of amenities or commercial real estate with cash flow from rental activities.

Moreover, affordable housing real estate, especially the grade B and C apartment segments in big cities, has full legal status and clear construction progress will continue to be bright spots in the last months of the year.

In the market, some investors who borrowed a loan to buy real estate previously are now trying to pay bank interest, waiting for real estate prices to increase again. Some other investors are in the status of “wait and see”, accepting savings with low interest rates from banks instead of investing in buying real estate.

These two things are increasing pressure on the market’s recovery momentum.

It is said that when barriers are removed and new laws come in, the market recovery will increase real estate prices. Is this logical?

The market is unlikely to have a sudden price increase in the short term due to the influence comes from macro factors, global geopolitical crises, world economic instability, persistent inflation, and a risk of global debt crisis.

In addition, while new laws are about to come in, it still takes time for related circulars and decrees guiding implementation to be issued and applied.

In the long term, real estate price increases also depend on many other market variables such as the macroeconomic situation, interest rates, and exchange rates.

Short-term real estate issues remain Real estate businesses are hoping to take advantage of revised laws and tap into capital flow for the market with a clear and transparent legal system in the long term.

Real estate still beguiling investors Although the real estate market continues to struggle along, the fact that more products are being offered for sale, attracting the interest of buyers, illustrates that it will continue to bring profits.