Vietnam's Real Estate Market Keeps DROPPING, Rents go CRAZIER!!

Summary

Vietnam's real estate market is experiencing a significant downturn in 2023, with sales plummeting over 92% and a surge in bankruptcies among real estate companies. Despite government incentives, the market remains stagnant with low transaction volumes. However, the rental sector is thriving, with rental prices increasing due to high property values and demand from renters. The industrial sector shows promise with high occupancy rates and interest from multinational corporations.

Takeaways

• 🛠 Vietnam's real estate market is facing unprecedented challenges in 2024, with low sales and high bankruptcy rates.
• 🔍 Sales have plummeted significantly, with over 92% drop in transactions for townhouses and villas, highlighting the market's dire state.
• 💸 Despite government incentives and lower prices, the market remains stagnant with few transactions, reflecting a lack of buyer confidence.
• 💳 The rental market presents a paradox, soaring despite the overall downturn in the real estate sector, driven by increasing demand from renters.
• 💼 A notable shift has occurred, with investors and buyers adopting a cautious approach, moving away from purchasing towards renting.
• 📈 Prices for rental properties have increased significantly, with some areas seeing up to 30% hikes, underscoring the growing demand for rental units.
• 💵 High property prices and strict loan requirements have deterred consumers, contributing to the real estate market's challenges.
• 🔧 Legal and construction requirement processes have become more cumbersome, further slowing down transactions and developments.
• 👨‍💻 Ken Yung, an experienced international and business immigration lawyer, provides insights into the situation, suggesting industrial real estate as a potential opportunity amidst the slump.
• 📢 The industrial and logistics sectors remain vibrant, with multinational corporations driving demand for industrial spaces, offering a silver lining in the current real estate landscape.

Q & A

What is the current state of Vietnam's real estate market according to the transcript?

The real estate market in Vietnam is facing unprecedented challenges with extremely dire circumstances. Sales numbers have dropped significantly, with some properties experiencing a decline of over 92%. The market is in a slump with very few transactions of buying and selling properties, despite government incentives and developers lowering prices.

What factors have contributed to the collapse of the real estate market in Vietnam?

The collapse is attributed to high property prices, strict loan requirements, a desire among investors and consumers for higher liquidity, slow market movement, limited supply of new projects due to developer hesitancy, and longer legal and construction requirement processes.

How has the real estate market's downturn impacted the economy and employment in Vietnam?

The downturn has had a significant impact on the economy and employment. Around 1,300 real estate companies filed for bankruptcy in 2023, leading to a 21% increase in disbanded or suspended companies compared to 2022. Additionally, 70% of brokers quit their jobs, and construction companies saw a 16% drop in revenues and 66% decrease in profits.

What is the current trend in the rental market in Vietnam?

In contrast to the selling market, the rental market in Vietnam is experiencing an increase in prices by 10 to 30% due to higher mortgage interest rates and property prices. This has led to a rise in demand for rentals among both locals and foreigners.

How does the demand for industrial rentals look in Vietnam?

The demand for industrial rentals is positive, with occupancy rates in the north at about 83% and in the south at 91%. Multinational corporations are moving their factories to Vietnam, leading to a rise in industrial rentals and a good sign for the continued growth of the industry.

What are some of the government incentives to stimulate the real estate market?

The government issued a stimulus package worth VND 120 trillion, although only 83 billion VND has been dispersed so far, which is only 0.07% of the allocated amount. These incentives are aimed at encouraging transactions and boosting the market.

What is the role of foreign investors in the Vietnamese real estate market?

Foreign investors play a significant role, especially in the industrial sector. Many multinational companies are looking to move their factories to Vietnam, thereby increasing the demand for industrial spaces and zones. Foreign investors are also looking for opportunities in the industrial, logistics, or supply chain sectors to invest in real estate.

What is the impact of high property valuations on the real estate market?

High property valuations have led to higher loans, often up to 100% of the market value, making it difficult for buyers to sell at lower prices. This has resulted in unreasonably high prices, which in turn has contributed to the increase in rental costs as demand for properties remains high.

What are the rental rates for a one-bedroom apartment in different areas of Ho Chi Minh City?

The rental rates vary depending on the location and quality. For example, a one-bedroom in District 9 might cost about 8 million VND per month, while in the Ban Pearl Plaza area, it's around 16.5 million VND, in District 2 or Thao Nhim it's about 22 million VND, and in District 1 or the Golden River area, it's approximately 25 million VND per month.

What advice does Ken Yung give to those interested in investing in Vietnam's real estate market?

Ken Yung advises investors to look at opportunities in the industrial, logistics, or supply chain sectors. He also suggests that Vietnamese descent individuals should consider obtaining a Vietnamese passport and citizenship to own land outright. Long-term investments through the DT program or getting a work permit TRC are also recommended for staying informed and involved in the market.

How can foreigners invest in Vietnam's real estate market?

Foreigners can invest in Vietnam's real estate market through various means, including obtaining a long-term lease on land for factories or industrial parks, benefiting from the DT program, or getting a work permit TRC. They can also seek assistance from law firms experienced in helping foreigners invest in Vietnam.