Real estate supply in the first 6 months of the year is "poor, unattractive, and in short supply"

The market in the first 6 months of 2023 is still thirsty for supply

The Vietnam Association of Realtors (VARS) recently released the Vietnam Real Estate Market Report for the second quarter of 2023 and the first 6 months of 2023 with the theme "Market Limits".

According to VARS's report, the real estate market in the second quarter of 2023 took place as predicted, with more positive developments than the first quarter, but still needs stronger driving forces to create momentum, helping the market to "reverse" soon.

According to VARS's report, the supply of residential real estate has not improved much. In the second quarter of 2023, the country recorded more than 200 housing projects for sale with a supply of about 20,000 products on the market. However, most of the supply comes from projects in the next phases, with almost no new projects.

In particular, the mid-range apartment segment (VND25 - 50 million/m2) and high-end apartment segment (VND50 - 80 million/m2) continue to lead, accounting for 53% and 34% of the total supply of apartments for sale, respectively.

The market has almost no affordable apartments (under VND25 million/m2). The total supply of affordable apartments decreased by 98% compared to 2019.

In the first 6 months of 2023, the market still maintains a state of "thirst" for supply, especially the supply of affordable housing, suitable for the financial capacity of the majority of people.

“Poor, unattractive, and lacking are the right words to describe the current supply situation,” the VARS report stated.

Real Estate - Real estate supply in the first 6 months of the year 'poor, unattractive, in short supply' — Real estate supply is in serious shortage in the first 6 months of 2023.

VARS data also shows that secondary residential real estate prices, especially residential land products, are differentiated by price segment. Products serving real needs, priced under VND2 billion/product, recorded a price increase of about 5-7% compared to the previous quarter, with some areas recording hundreds of successful transactions.

The supply to the market in the quarter reached about 20,000 products. A series of projects were extended, kicked off, re-kicked off,....

Transaction volume in the quarter recorded a slight recovery, reaching about 3,704 transactions (approximately 18% of total newly launched supply), up more than 30% compared to the previous quarter but still down 40% compared to the same period last year.

The products traded are all high-quality construction products, with transparent legal documents and reasonable prices. Of which, 80% of the transactions are apartments with “clean” legal documents, developed by reputable investors. Arising from both customers buying for real housing needs and investors.

Regarding social housing projects, VARS statistics show that as of May 18, the country has completed 41 social housing projects in urban areas, with a construction scale of about 19,516 units, reaching 4.6% of the set target; 294 projects are continuing to be implemented, with a construction scale of about 288,499 units.

VARS assessed that the 120 trillion package has not had a "chance" to take effect, largely because the projects eligible for loans are still in the process of carrying out investment procedures.

Mechanisms and policies need to "scratch the right itch"

In order for the market to "reverse" soon, VARs believe that, in addition to continuing to research and issue new mechanisms and policies to increase the consistency of market support solutions, the Government needs to be more proactive in directing and ensuring that the decrees/resolutions/circulars issued in the past 6 months have practical effects.

“To ensure that mechanisms and policies are issued that “scratch the right itch”, directly impact the right problems, and avoid the situation of wasting time researching and issuing but not solving the problem, or even being counterproductive. It is time for state management agencies to have another channel to provide official, professional information, closely following the market through the subjects directly operating in the market”, VARS stated its opinion.

For investors, project developers, real estate trading floors, real estate brokers, customers, etc., the association recommends that this period be considered a profound lesson so that market participants will operate more cautiously and know their limits.

Real estate - Real estate supply in the first 6 months of the year is 'poor, unattractive, and in short supply' (Figure 2). — The Government needs to be more proactive in directing and ensuring the implementation of issued decrees/resolutions/circulars.

Accordingly, VARS forecasts that in the coming time, the 120 trillion VND credit package will likely be disbursed by the end of the third quarter for projects targeting the right subjects; the number of customers accessing loan packages with preferential interest rates will gradually increase, contributing to making the market more bustling.

Regarding M&A, this field will continue to be vibrant. Deals that complete the exploration and survey steps in the second quarter will continue to move to the negotiation and bargaining steps in the third quarter and the market will most likely witness the first few successful deals in the fourth quarter of 2023.

However, the number will not be large and will be limited to small-scale projects with basic legal completion. Medium and large-scale deals will continue to maintain the negotiation process until the end of the fourth quarter, even extending to the second quarter of 2024.

When M&A is successful, it will contribute to improving supply. Because unfinished projects that meet investors with financial potential will quickly be restarted. Business owners who earn money from M&A also have capital to return to implement the remaining projects.

VARS also expressed its hope that the supply of products that meet real housing needs and have good legal status from reputable investors will improve; the market will also be bustling to welcome new supply from social housing projects in the last 6 months of the year and by the end of the third quarter of 2023, VARS believes that the affordable segment market will likely show signs of recovery more clearly .

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