Though half a year has has passed, the real estate market has barely improved despite multiple measures being taken to back it.

More time needed Despite various supportive measures, the real estate market in Vietnam showed no significant improvement in the first half of 2023. Interest rates have been a key concern, with lending rates remaining high despite the State Bank of Vietnam’s (SBV) efforts to lower them. The SBV has made four key interest rate cuts since the beginning of the year, indicating its orientation toward lowering deposit interest rates among commercial banks. This, in turn, is expected to drive lending rates down, support businesses, and stimulate economic growth. Despite the central bank’s moves, there is a lack of interconnection between the money market and the interbank market. As a result, lending rates remain stubbornly high. A survey conducted by The Saigon Times reveals that current interest rates for home loans fluctuate between 11% and 15%, while deposit interest rates range from 7% to 9%. This disparity discourages the inflow of short-term savings into the sluggish real estate market. Looking back at the interest rate movements during the 2011-2013 real estate crisis, Nguyen Quoc Anh, deputy general director of Batdongsan.com.vn, said the SBV had also sharply reduced interest rates of one to six months in the first quarter of 2012. This contributed to real estate market growth in the second quarter of 2013. “Compared to the current period, the short-term interest rates from one to six months started rising in the second quarter of 2022, and the SBV began its interest rate cuts in the first quarter of this year. Thus, it is projected that the real estate market may rebound in the second quarter of 2024,” Anh said. While this may hold true in theory, lending rates may remain a headache for businesses, individuals, homebuyers, and investors. According to analysts, the current interest rates for home loans still hover around 13%. Therefore, it may be necessary to further reduce the rates by 1.5 to 2 percentage points to stimulate demand in the real estate market. They also predict that this may occur in 2024 when the market liquidity improves as government measures to alleviate difficulties in the real estate and corporate bond markets have begun to take effect. Currently, investors, homebuyers, and businesses still have a wait-and-see attitude. Apart from bank loans, corporate bonds are also a major fund-raising vehicle of estate market companies. However, confidence in the corporate bond market remains weak as issuing organizations, especially housing developers, have come under huge pressure from bond repayment this year. The volume of bonds issued by real estate firms falling due this year is estimated to surpass VND120 trillion. Meanwhile, legal problems concerning housing projects remain a predicament and are the most significant obstacle faced by the real estate sector. When legal issues are involved, it requires much time to resolve them. This explains why the real estate sector still struggles although a series of policies have been introduced to support the housing market since the beginning of the year. Shifts in market dynamics The current slowdown in the real estate market has drawn comparisons to the challenging business conditions of the 2011-2013 period. However, experienced investors recognize the differences in market dynamics. The landscape has changed, prices have shifted, and new investors with different mindsets have influenced market movements. One notable distinction is the pricing of properties. After a period of rapid growth, housing prices have reached exceptionally high levels. This has made both individuals and businesses more cautious and prudent in their approach, leading to careful market timing. Economist Dinh The Hien emphasized that the current real estate market is much larger than it was in 2013. While support packages have been introduced, they may not have the same impact on market liquidity as before. Hien believes that for the market to recover, capital should be injected into it and housing prices should be lowered to bring buyers back. Rather than immediate government intervention, stabilizing the financial system and revising down interest rates are considered more important. Patience and composure are advised to allow the market to undergo a transformation in its dynamics, which is expected to occur by early 2024. “Real estate is not a market for excessive profits but a large-scale and sustainable market that contributes to the development of other industries. And it is currently moving towards a safe and sustainable trajectory, playing its role in the economy,” Hien noted. Real estate companies are holding shareholder meetings with a message of perseverance. As demand and liquidity remain stagnant, a prolonged situation could trigger a new crisis cycle, pushing companies beyond their limits. Enterprises have been forced to restructure, postpone sales events, reduce revenue estimates, trim advertising budgets, and cut employment. Unlike the real estate market crisis a decade ago, which was mainly caused by supply-side factors, the current downturn is being influenced by a broader range of economic factors. It has become part of the wider economic fluctuations, requiring a cautious approach in formulating recovery plans due to the market’s rapid expansion.