Industry players say Vietnam's housing market, which in recent years has been beset by distressed developers and a nationwide corruption crackdown that has slowed permitting and financing, is starting to turn a corner. More relaxed rules in a new land law are fuelling hopes for a recovery, though few people believe supply will match demand in the expanding middle class in the near future.
The sector hit turbulence in 2022, when some of the highest flyers in the real estate industry were arrested under the government's anti-graft campaign. The clampdown triggered concerns about contagion as developers struggled to roll over bonds. Vietnam was rife with warnings at the time about the imploding Evergrande -- even the Finance Ministry posted an article about lessons from the Chinese company's downfall.
But unlike China, Vietnam has not overbuilt and created a bubble, Savills Deputy Managing Director Troy Griffiths told Nikkei Asia. The burgeoning supply chain hub's two big cities, Hanoi and Ho Chi Minh City, need about 60,000 new homes a year, but are on track to finish just half that number in 2024, investment bank UBS said in a report titled "In a recovery wave."
Thanh Pham, associate director at real estate consultancy CBRE, agreed, saying that demand is so insatiable that buyers often purchase condominiums, both new and used, without title deeds.
"Vietnam's market is different from others. It's not China, there's not too much supply," she said.
But as the Chinese crisis escalated, some were quick to compare the two markets, in both of which it is common for buyers to pay in instalments before construction is complete. Chinese citizens went on a mortgage strike at the sight of white elephants filling up their cities. Vietnamese, too, began to worry that developers would run out of cash before finishing projects and handing over condos. This was epitomized by heavily indebted property giant Novaland.
As recently as this summer, about 300 Novaland customers who did not expect the company to complete their units stopped paying their mortgages. Novaland, which did not reply to a request for comment, said in a statement that it is "very understandable that under the pressure of prolonged financial difficulties, a small number of customers do not have enough patience to work with us."
But in Vietnam, a one-party state of 100 million people, this problem has been at a much "smaller scale" than China's, said Ken Duong, managing partner at Duong Global Business Consulting. He told Nikkei Asia that threats to the recovery remain, but Hanoi may have been able to keep fear from spreading by muzzling social media.
The government also introduced restructuring options for bond issuers and bailed out Saigon Commercial Bank after a run on the lender triggered by its link to disgraced property developer Truong My Lan. She is now on death row after being convicted of fraud.
Some 33,500 new condos were built in Hanoi and Ho Chi Minh City in the first half of this year, and 29,500 in all of 2023, according to Savills. The figures are even lower than in 2014 -- the only time in the past decade when the supply of new housing units fell below 50,000, the Savills data shows.
"We might be at a low point now," Griffiths said. But "Vietnamese love property," and many are aching to move to cities if the infrastructure and construction can catch up, he added. The population is 62% rural, the state statistics office said.
Many are pinning their hopes on the updated Land Law, which took effect on Aug. 1. While all land technically belongs to the communist state, the legislation allows prices paid by developers to fluctuate more in line with market conditions, rather than being set by bureaucrats for extended periods. Advocates say developers will be able to pay owners higher prices to sell their land and relocate.
Licensing also slowed during the graft clampdown, as government workers hesitated to sign off on projects that might come under scrutiny. The unprecedented crackdown has seen hundreds of officials removed from office or the communist party, including two presidents. In the private sector, the biggest scalps came this year, with Truong My Lan's death sentence and property tycoon Trinh Van Quyet being sentenced to 21 years' imprisonment for fraud.
The shadow cast by the war on graft means doubts remain about the pace of the property sector's recovery. "There's still so much uncertainty in the unravelling," said Duong. He added the market will probably rebound in 2025, but that he and others remain "uneasy."
UBS also noted that "real estate companies continue to extend their bond maturity dates, suggesting the maturity crisis has yet to be fully addressed." Data compiled by the bank shows that the sector accounts for 43% of bonds coming due by mid-2025.
