Vietnam's construction industry expected to rebound

The growth momentum of Vietnam's construction industry is expected to continue over the forecast period, recording a compound annual growth rate of 13 per cent from 2023 to 2027. Construction output is expected to reach VND903 trillion ($38.1 billion) by 2027.

The nation's construction industry faced considerable challenges in 2023. Rising material prices, higher debt taken by builders, and dampened demand during the pandemic have all resulted in the downfall of hundreds of construction firms in the Vietnamese market in recent quarters.

To spur economic growth and development in the country, the government has been increasingly investing in transport infrastructure. Several projects were completed in the second half of 2023, with many more planned to be finished over the next 2-3 years. These projects are set to keep supporting the recovery of the struggling industry in Vietnam over the short to medium term.

The report also pointed out that developers stalled more than a thousand projects in Vietnam last year due to the funding crisis. The crackdown by the government on corruption and builders taking on too much debt are among the various factors that have triggered a property crisis. According to the Ministry of Construction, this has affected more than 1,800 builders, forcing 340 companies into insolvency in the first quarter of 2023.

The Vietnamese Real Estate Association also revealed that the government has frozen resources, leading to a funding crunch for developers. As a result, builders have suspended more than 1,200 real estate projects totalling $34 billion.

The association also revealed that each of the 63 provinces and cities in Vietnam has an average of 20 suspended projects. The stoppage of these construction activities is impacting the growth of the domestic market.

Meanwhile, construction material prices further increased in the second half of 2023. Despite the government's attempts to boost demand for iron and steel by reducing supply through measures such as cutting public investment, defunding crucial projects, and emphasising social housing initiatives, construction material prices remained high in the first half of 2023.

This has added further pressure to the market's growth. In the first half of last year, the surge in material prices resulted in many firms halting their projects, as they were unwilling to take on the financial risks.

Domestic construction companies broaden horizons Vietnamese construction firms are increasingly setting their sights on international markets, with some industry leaders undertaking ambitious projects abroad.

Encouraging green urban and construction finance Green finance is crucial for Vietnam’s sustainable urban and construction development. To encourage it, banks are considering regulatory support to boost green financing.

Vietnam’s construction sector welcomes a greener vision The transition to a carbon-free world, beginning with greenhouse gas (GHG) inventories, will aid industry development.