In Vietnam's real estate sphere, optimism emerges despite lingering challenges

By Ha Linh - Apr 09, 2024 | 08:35 AM GMT+7

TheLEADERAgainst a backdrop of economic turbulence, Vietnam's real estate market is witnessing a tentative revival, buoyed by promising developments and cautious investor optimism.

In Vietnam's real estate sphere, optimism emerges despite lingering challenges
The potential buyers are considering the Vinhomes Royal Island project in Haiphong, which is tailored for the elite class. Photo by Hoang Anh

Amidst the bustling scene of construction workers and towering steel structures in the port city of Haiphong, Deputy Chairman of the Vietnam Real Estate Association, Nguyen Van Dinh, appears to have unearthed the catalyst to rekindle the sector's fortunes.

From a forgotten parcel of land, nestled just across a river from the urban core, emerges the Vinhomes Royal Island urban development project, swiftly taking shape with a velocity that defies imagination.

Spanning an expansive 877 hectares, Vinhomes Royal Island stands as the largest mixed-use urban development in Vinhomes' portfolio, boasting an array of amenities tailored for the elite, including the prestigious Royal Horse Riding Academy, a high-end marina with over 300 berths, and a sprawling 36-hole golf course spread across 160 hectares.

These luxurious offerings coalesce to form a burgeoning enclave, dubbed the 'Billionaire's Island' of the North.

For Dinh, the vibrant atmosphere on the construction site, coupled with the influx of prospective buyers not only from Haiphong but also neighboring provinces, signals a promising resurgence for the real estate market.

In contrast to prevailing sentiments among policymakers and analysts, who contend that only budget-friendly projects hold allure for buyers, Vinhomes Royal Island targets affluent clientele, willing to invest upwards of VND9 billion ($360,000) for a residential unit.

However, Dinh remains steadfast in his belief that projects boasting impeccable legal compliance, backed by reputable developers, possess the potential to invigorate market liquidity, even at premium price points.

This optimism comes amid a protracted period of stagnation in the real estate arena, characterized by dormant projects and waning investor interest, attributed to financial constraints and dwindling consumer confidence.

Efforts to resuscitate the market have seen concerted governmental initiatives aimed at untangling legal intricacies and reducing lending rates. However, despite these endeavors, the market's revival remains sluggish, hindered by persistent legal hurdles and lingering apprehensions among investors.

In the face of these challenges, Dinh identifies a dual-pronged approach as the key to unlocking liquidity: a renewed focus on legal clarity and a restoration of investor faith.

He posits that once these impediments are addressed, the market's latent potential will be unleashed, fostering a climate ripe for recovery.

Indeed, recent market activity appears to validate this assertion, with select projects from major developers witnessing brisk sales, underscoring the enduring appeal of quality offerings over bargain prices.

In the eyes of observers like Dinh, the path to real estate rejuvenation lies not in price reductions but in the cultivation of trust and confidence, engendered by projects of distinction and developers of repute.

Echoing this sentiment, Nguyen Tho Tuyen, Chairman of BHS Group, emphasizes that the removal of legal impediments holds the key to unlocking the market's potential for recovery.

He underscores that despite the economic headwinds and wavering consumer sentiment, Vietnamese society possesses a remarkable capacity for resilience.

He contends that with the removal of legal roadblocks and the emergence of catalysts such as reputable developers and standout projects, investor sentiment can swiftly rebound.

Indeed, recent market dynamics lend credence to this perspective. A select few projects from major developers, launched amidst the prevailing uncertainty, have enjoyed robust liquidity, underscoring the primacy of quality and reputation in driving consumer interest.

In this context, price reductions pale in comparison to the allure of excellence and integrity. Customers increasingly prioritize project quality and developer credibility over mere affordability, signaling a paradigm shift in consumer behavior.

Tuyen said: "The market's inherent quality isn't poor, and buyers' financial resources remain substantial. However, the market currently lacks the requisite products with legal compliance, backed by financially robust developers, to entice investors."

Hence, projects by developers such as Vinhomes and Masterise Homes have showcased their resilience amidst turbulence, drawing clientele despite premium pricing compared to market norms.

Both Dinh and Tuyen share the belief that from these small sparks like Vinhomes Royal Island, customer and investor confidence will gradually resurge, fostering a step-by-step recovery in the real estate market before eventually gathering the momentum necessary to regain growth.