Vietnam's real estate demand plummets but prices continue to rise

Vietnam’s residential property prices continue to rise strongly, as demand and supply plummet. In Hanoi, the country’s capital city, the average price of apartments rose strongly by 16.08% y-o-y (12.32% inflation-adjusted) to US$2,007 per square meter (sqm) in Q1 2023, based on figures released by JLL Vietnam. On a quarterly basis, prices increased 2.35% during the latest quarter (1.59% inflation-adjusted).

Vietnam’s house price annual change

Likewise in Ho Chi Minh City (HCMC), apartment prices rose by 10.32% in Q1 2023 from a year earlier (6.74% inflation-adjusted), to an average of US$3,229 per sqm. Quarter-on-quarter, apartment prices in the city increased 2.7% in Q1 (1.94% inflation-adjusted).

But both demand and supply are exceptionally low. In Hanoi, sales for apartments, as well as for villas/townhouses, plunged by 58% and 78%, respectively, in Q1 2023 as compared to a year earlier, according to CBRE. Similarly in HCMC, the number of apartments sold declined by 71% and by 80% for villas and townhouses, according to a report released by Savills.

Vietnam opened up to foreigners eight years ago. Foreign residents in Vietnam are now permitted to purchase dwelling houses and can own the house but not the land on which it is built. Despite this development, many potential foreign homebuyers are still discouraged to invest in Vietnam because of its inconsistent laws and complex regulatory framework, especially for foreigners looking to buy property in the country.

Residential construction activity remains depressed, as funding woes and insolvency continue to beset the sector. The new supply of apartments in Hanoi dropped 27% y-o-y in Q1 2023 while in HCMC, new supply fell by 25% over the same period.

The outlook for the property market is still bleak. “The bank policy that tightens loans for the real estate sector will significantly affect both supply and demand in the coming time. For small developers, the difficulty in accessing capital resources can lead to project delays, reducing the construction scale and affecting the project’s sales progress and the payback schedule,” said JLL Vietnam.

“Meanwhile, demand from the group of investment buyers will decrease. The group of real owner-occupiers who need to leverage finances to buy apartments will also face difficulties in the coming time,” JLL added.

Yet the wider economy remains vibrant. During 2022, Vietnam’s economy grew strongly by 8% from a year earlier – the highest growth recorded since 1996, according to The World Bank. The economy continues to grow this year, albeit at a slower pace. In Q2 2023, the country’s real GDP growth stood at 4.14% from a year earlier, following a y-o-y expansion of 3.28% in the previous quarter.

The World Bank expects the economy to grow by another 6.3% this year, primarily driven by robust domestic demand and net exports, as well as the partial implementation of the capital investment of the 2022-2023 Economic Support Program. On the other hand, the IMF’s forecast is more conservative, projecting the Vietnamese economy to grow by 5.8% this year.

Sales plummeting

Residential property demand in Vietnam, particularly in Hanoi and HCMC, remains subdued, as homebuyers’ purchasing power was strained by high inflation and rising interest rates.

During 2022, the absorption rate for the whole market reached only 39%, translating into 19,000 transactions – just about 17% of the transaction volume seen in 2018, according to the Vietnam Association of Realtors (VARS).

“Poor supply, weak cash flow, and shrinking buyer confidence caused real estate transactions in 2022 and Q1 2023 plunge,” said VARS.

In Hanoi:

  • Apartment sales fell by 54% q-o-q and 58% y-o-y to around 2,000 units in Q1 2023, according to CBRE. This was supported by Savills, which confirmed that Nam Tu Liem, Bac Tu Liem, and Cau Giay accounted for 51% of the total quarterly sales in Q1.
  • For villas and townhouses, there were just 88 units sold in Q1 2023 – down by 47% from the previous quarter and by 78% from a year earlier. Likewise, the absorption rate fell to 12%, down by 9 percentage points q-o-q and by 32 percentage points y-o-y. It was the lowest absorption rate seen since 2016.

Vietnam Apartment Sales graph


  • Apartment sales weakened further to just 865 units in Q1 2023, sharply down by 38% from the previous quarter and by 71% from a year earlier, according to Savills. The market absorption rate fell to 13%, 4 percentage points lower than the previous quarter and 60 percentage points down from a year ago.
  • Sales of villas and townhouses fell sharply by 59% q-o-q and by 80% y-o-y to just 46 units in Q1 2023. The absorption rate was poor at only about 7%.

“Performance was slow in the first quarter with low buyer confidence, limited new supply, high prices, and an early Lunar New Year,” said Savills.

Vietnam Villas and Townhouses Sales graph

Apartment supply falling

In Hanoi, there were 2,040 new supply of apartments in Q1 2023, down by 30% from the previous quarter and by 27% from a year earlier, based on figures from Savills.

As a result, the total stock of apartments fell by 4% y-o-y to 19,483 units in Q1 2023. Nam Tu Liem, Bac Tu Liem, and Cau Giay accounted for 46% of the primary stock of apartments in the capital city.

For the whole year of 2023, about 7,000 new apartment units will enter the market.

“In 2023, nine new launches and the next phases of two projects will add 7,000 units. Grade B will have an 83% share. Gia Lam, Ha Dong, and Hoang Mai will deliver a 60% share,” said Savills in its Q1 2023 Hanoi Residential Market Report.

“Gia Lam and Dong Anh will become urban districts this year. Ha Noi will develop two “cities within the city”, including one in the northern part of Red River (Dong Anh, Me Linh, and Soc Son districts), and the other in the West (Hoa Lac and Xuan Mai),” added Savills. This means that these districts will account for a large share of supply in the coming years.

Likewise in HCMC, new apartment supply fell by 25% y-o-y to 1,610 units in Q1 2023. Two new projects delivered 735 units while the next phases of five existing projects had 875 units.

“New supply was limited, and several developers have either put their projects on hold or reduced their properties for sale on the primary market,” said Savills in its Q1 2023 HCMC Residential Market Report.

HCMC had a total primary stock of 6,820 units in Q1 2023, down by 15% from the previous quarter but up by 68% from a year ago. District 9 had the biggest share of 24%, followed by District 1 with a 16% share.

Over 9,000 additional units are expected to be delivered by the end of this year.

Vietnam Residential Construction by Region graph

Supply of villas and townhouses also falling; many projects halted

In Hanoi, the primary supply of villas and townhouses fell by a huge 50% y-o-y to 759 units in Q1 2023. By year-end, 1,865 dwellings from 16 projects are expected to enter the market. Me Linh District will have the biggest share of 18% of future stock, followed by Hoai Duc with 17% and Thanh Tri with 14%. 

“Infrastructure development will also support real estate development,” said Savills. “Key upcoming projects include Vinh Tuy Bridge Phase 2 and Metro Line 3 (Nhon-Cau Giay), and Ring Roads 3.5 and 4. Surrounding districts such as Hoai Duc, Cau Giay, and Lam Tu Liem (west), Gia Lam and Long Bien (east), and Hoang Mai Thanh Tri (south) will benefit.”

In HCMC, on the other hand, the primary supply of villas and townhouses decreased by 8% q-o-q but up by 29% y-o-y to 629 dwellings. Thu Duc City accounted for about 72% share of the primary supply, followed by Districts 8, 12, Binh Chanh, Binh Tan, Nha Be, and Tan Phu.

For the rest of 2023, the future supply of newly built villas and townhouses in HCMC was limited to 480 units, based on projections released by Savills.

Accordingly, property developers have suspended more than 1,200 real estate projects countrywide, worth about VND 800 trillion (US$33.8 billion) as funding woes and insolvency continue to beset the construction sector.

In fact, according to VARS, each of Vietnam’s 63 provinces and cities has recently suspended 20 projects, on average. In Hanoi, about 400 projects are on hold, while in HCMC, halted projects have reached more than 300.

The memory of a housing bust (2009-2013)

Vietnam witnessed a prolonged housing crisis after the 2008-9 global financial crisis. Property prices plunged by double-digit figures. The government was embarrassed, banks were bankrupted, and the economy slowed sharply.

The banking system effectively collapsed. One out of every ten loans in the banking system stopped paying.

To bolster demand, the government provided the real estate market with a US$1.4 billion stimulus package in 2013, subjected developers to stricter financial requirements, and bought US$8 billion of non-performing loans. The central bank slashed the refinance rate and discount rate several times and gave VND5 trillion (US$221 million) credit to homebuyers through Vietinbank. These measures were, over time, successful.

Vietnam Area of Housing Floors Constructed graph

Pre-pandemic real estate growth

Following several years of housing decline, the Vietnamese government’s efforts helped the real estate market recover - in fact, apartment prices in HCMC surged 75% (63% inflation-adjusted) from 2017 to 2019.

Vietnam has begun to be seen as the next luxury property market hotspot, with a booming economy, coupled with laws that recently have made it easier for foreigners to buy. As a result, wealthy international investors have been drawn to the country.

Vietnam’s improving infrastructure is also a plus factor. “Vietnam focuses on investment in infrastructure including 2,000 km of new highways, subway systems in Hanoi and Ho Chi Minh City, and many airport expansion and construction projects,” said JLL.

Aside from increasing foreign interest, the property market was also buoyed by strong demand from wealthy locals. The homeownership rate in Vietnam exceeds 90% - one of the highest rates in the world.

“We have more and more very rich Vietnamese, particularly entrepreneurs looking for places to put their money,” said Niel MacGregor of Savills Vietnam.

Proposed amendments to Housing, Land, and Real Estate Laws to usher in positive changes, amidst declining FDIs

Vietnam opened up to foreigners eight years ago. Through the Housing Law (Law on Housing No. 65/2014/QH13) which became effective on July 1, 2015, foreigners who have been granted a Vietnamese visa, plus foreign investment funds, banks, Vietnamese branches, and representative offices of overseas companies could now purchase residential property. Foreigners can now own all types of properties, including condominiums and landed property such as villas and townhouses. Properties owned by foreigners can be sub-leased, inherited, and collateralized.

Moreover, overseas Vietnamese who have maintained their Vietnamese citizenship are treated like locals and are permitted to own unlimited property in their own names. It is estimated that about 70% of the 4 million overseas Vietnamese around the world still maintain their original citizenship.

For foreign individuals, the house ownership period is 30 years, but it can be extended. The new law also limits foreigners from owning more than 30% of a single apartment building, or more than 350 houses and apartments in a ward, a subdistrict-level administrative area.

Detailed guidelines on implementing the Housing Law (Decree 99) became effective on December 10, 2015. According to Decree 99, foreigners are allowed to own houses in Vietnam as long as they were able to meet these conditions:

  • The foreigner’s valid passport should have an entry stamp affixed to it from Vietnam’s immigration authority.
  • They should not be in the category of people entitled to preferential treatment or diplomatic immunity in accordance with the Ordinance on Preferential Treatment Rights and Immunities Applicable to Representative Diplomatic Offices, Foreign Consulates, and Representative Offices of International Organisations in Vietnam.

On August 15, 2016, the Ministry of Construction Circular 19/2016/TT-BXD (Circular 19) which contains guidelines on the Law on Housing, and on Decree No. 99/2015/ND-CP, became effective.

  • As for individual houses under commercial housing projects (including villas and semi-detached housings), foreigners are allowed to own 10% of the total individual houses of a particular project.

 Despite these developments, Vietnam’s land, housing, and real estate laws are still publicly perceived as rather complex and confusing because of inconsistency in some provisions. To address this issue and to encourage foreign investment, the government is now in the process of amending its Land Law and the related Housing Law. The amended laws are expected to be approved in November 2023.

“According to the Law on Housing 2014 and Law on Real Estate Business 2014, foreigners are entitled to buy and own houses in Vietnam, including apartments and separate houses associated with land use rights. Meanwhile, according to the Land Law 2013, foreigners are not eligible to own land use rights in Vietnam. Therefore, the proposed amendments in the Revised Law on Housing are considered essential to ensure a consistent and rigid regulatory framework for foreigners looking to buy property in Vietnam,” said Dang Phuong Hang of CBRE Vietnam.

There are more than 100,000 foreigners currently living in Vietnam, up from about 83,500 three years ago. Most of the migrants come from China, Korea, Japan, Taiwan, and the United States. They are concentrated in big cities such as Hanoi, HCMC, Da Nang, and Nha Trang.

To date, 3,053 foreigners have bought residential property in Vietnam, mostly apartments, while another four million or so, including overseas Vietnamese, want to buy property in the country, according to Hoang Hai, director of the Housing and Real Estate Market Management Agency under the Ministry of Construction.

During 2022, foreign direct investment (FDI) fell by 11% to US$27.72 billion from a year earlier, following a y-o-y growth of 9.3% in 2021 and a decline of 25% in 2020, based on figures from the Ministry of Planning and Investment. The biggest contributor was Singapore, representing about 23.3% share of the total FDI registered in Vietnam last year, followed by Korea (17.6% share), Japan (17.24%), China (9.1%), and Hong Kong (8%).

Foreign capital inflows continue to fall this year, partly due to complicated legal structures. In the first half of 2023, the FDI capital in Vietnam totaled US$13.43 billion, down by 4.3% from the same period last year. FDI in real estate amounted to US$592.1 million, accounting for a 6.3% share in terms of new registered capital and adjusted registered capital of projects.

Vietnam Foreign Direct Investment (FDI) graph

New free trade agreements to attract more foreign investors

In recent years, Vietnam signed two landmark free trade agreements that are expected to boost foreign investments and accelerate institutional reform.

The EU-Vietnam Free Trade Agreement (EVFTA), which came into force in August 2020, will provide opportunities to increase trade and support jobs, through the following:

  • eliminating 99% of all tariffs;
  • reducing regulatory barriers and overlapping red tape;
  • ensuring the protection of geographical indications for over 200 products;
  • liberalizing government procurement rules;
  • obligations on antitrust and mergers; and,
  • provisions on sustainable development, particularly on climate, labor, and human rights.

The EVFTA is considered the most comprehensive agreement so far between the EU and any ASEAN country.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) also came into force in January 2019 – a free trade agreement between Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, and Vietnam. The agreement is expected to benefit the real estate market.

  • Foreign investors are protected through the Investor-State Dispute Settlement (ISDS) mechanism, which applies to cross-border investments in property development.
  • The CPTPP also enlarges the real estate services in which foreign investors can participate, including real estate brokerage services, real estate exchange floors, real estate consulting services, and real estate management services, with respect to both residential and commercial properties.

The positive effects of these new free trade agreements are expected to be fully felt after the removal of Covid-related restrictions and as economic activity returns to pre-pandemic levels.

Apartment rents rising; vacancy rates improving

In Hanoi, the average asking rent for Grade A apartments was US$29.08 per sq. m. per month in Q1 2023, up by 6.1% from a year earlier, according to CBRE. On a quarterly basis, rents were up slightly by 0.7%.

Likewise, Grade B apartments’ average monthly rent rose by 5.1% y-o-y to US$17.37 per sq. m. Quarter-on-quarter, rents recorded a 1.31% increase in Q1 2023.

Grade A apartments recorded a vacancy rate of 27.86% in Q1 2023, down by 14.47 percentage points as compared to a year earlier. Similarly, the vacancy rate for Grade B apartments also declined by a huge 21.94 percentage points to 25.71% over the same period.

Expats working in industrial parks are a major source of demand for serviced apartments in Hanoi.

The supply of serviced apartments in Hanoi was more or less steady at 4,930 units in Q1 2023. Grand K Hotel Suites Hanoi, a Grade A project in Cau Giay District, is the most recent project in the capital city launched in end-December 2022, providing 262 units, according to CBRE.

From 2023 to 2025, Hanoi’s serviced apartment market is expected to see an additional supply of 2,789 new units. 

Low to moderate rental yields

Gross rental yields in Hanoi and Ho Chi Minh City - the return earned on the purchase price of a rental property, before taxation, vacancy costs, and other costs – can be low to moderately good, depending on location. 

  • In Hanoi, gross rental yields range from 2.41% to 11.47%, depending on the district but still, the overall average for the city is 4.68%.
  • In Ho Chi Minh City, yields are slightly lower but more consistent, at between 1.98% to 5.63%, again depending on the district. The average for the city is 4.01%.
  • In Da Nang, the rental yields are between 2.87% and 6.32% with an average of 4.24%.

Round-trip transaction costs are low in Vietnam. See our Property transaction costs analysis for Vietnam and Property transaction costs in Vietnam, compared to the rest of Asia.

Interest rates falling, mortgage market still underdeveloped

In June 2023, the State Bank of Vietnam (SBV), the country’s central bank, lowered its benchmark refinancing rate again by 50 basis points to 4.5%, its third consecutive rate cut in the past three months in an effort to spur economic growth. Likewise, the discount rate was also lowered from 3.5% to 3.0%.

“Over the past months, the domestic economic growth has been faced with many difficulties, but the inflation has been kept under control; the liquidity of the credit institutions and the foreign bank branches are ensured,” said the central bank. “Therefore, in order to further implement the policy of the National Assembly, the Government, and the Prime Minister on reducing the common lending interest rates, supporting businesses and the people to enhance their capital accessibility, contributing to recovering production and business activities, the SBV has decided to continue to cut the key interest rates.”

The central bank asked credit institutions to reduce loan interest rates and supply capital for prioritized sectors, including individual housing demand, social housing, houses for workers, and affordable commercial housing projects.

In early-2023, 16 banks in Vietnam, including BIDV, Agribank, Vietcombank, ACB, Eximbank, Technombank, MBBank, BIB, and SHB,  have committed to reducing their loan interest rates by 0.5% to 3.5% to below 9.5% per annum. 

In general, home loan interest rates in Vietnam are attractive, with preferential interest rates of 5.99% to 9.5% per annum for 3 to 36 months. After that period, borrowers will have to pay commercial interest rates, depending on the bank.

However, the Vietnamese mortgage market is still underdeveloped; most homebuyers pay cash. Developers are now starting to work with banks to offer mortgages to buyers, but strict loan procedures still hinder the local mortgage market. The loan-to-value (LTV) ratio rarely exceeds 50% of the appraised value of the property. The term period is usually 15 years.

Strong economic growth, recovering tourism

During 2022, Vietnam’s economy grew strongly by 8% from a year earlier – the highest growth recorded since 1996, mainly due to a low base effect coupled with a strong recovery in domestic private consumption, robust foreign direct investment, and solid performance in export-oriented manufacturing, according to The World Bank.

The economy continues to grow this year, albeit at a slower pace. In Q2 2023, the country’s real GDP growth stood at 4.14% from a year earlier, following a y-o-y expansion of 3.28% in the previous quarter. By sector:

  • Services grew by 6.11% in Q2 2023 from a year ago.
  • Agriculture, forestry, and fisheries expanded by 3.25% y-o-y in Q2 2023.
  • The industry and construction sector grew by a modest 2.5% over the same period.

The World Bank expects the economy to grow by another 6.3% this year, primarily driven by robust domestic demand and net exports, as well as the partial implementation of the capital investment of the 2022-2023 Economic Support Program. On the other hand, the IMF’s forecast is more conservative, projecting the Vietnamese economy to grow by 5.8% this year.

Vietnam Real GDP Growth and Inflation graph

Despite the adverse impact of the Covid-19 pandemic, the Vietnamese economy managed to post decent growth of 2.87% in 2020 and another 2.56% in 2021, coming after almost four decades of uninterrupted growth:

  • 1981-1990 - average real GDP growth of 5.9% per year
  • 1991-2000 - average real GDP growth rate of 7.6% annually
  • 2001-2010 - average real GDP growth rate of 6.8% annually
  • 2011-2020 – average real GDP growth rate of 6.2% annually

Tourism is recovering, but still far from its pre-pandemic levels. In 2022, there were more than 3.36 million foreign visitors in Vietnam, according to the country’s GSO. This was about 23.3 times higher than in 2021 but still down by a huge 79.9% as compared to figures seen in 2019 prior to the Covid-19 pandemic. Tourist arrivals grew by an annual average of 23% during 2016-19.

The upward trend in tourist arrivals continues this year. In the first half of 2023, Vietnam welcomed over 5.6 million foreign visitors, up by a whopping 282% from the same period last year. Likewise, total tourism receipts rose by 29.4% y-o-y to VND 343.1 trillion (US$14.5 billion) in H1 2023.

Korea accounted for the biggest share of about 28% of total international visitors in Vietnam in H1 2023, followed by China, the United States, Taiwan, Thailand, Japan, and Malaysia.

Vietnam Foreign Arrivals graph

Annual inflation slowed to 2% in June 2023, down from 2.43% in the previous month, and marked the lowest reading since February 2022, as prices decline for transport and telecommunications, according to figures from GSO. It is now far below the central bank’s inflation target of under 4.5%.

The country’s unemployment stood at 2.3% in Q2 2023, at par from 2.25% in the previous quarter and 2.32% a year earlier, according to GSO.

From 6.42% in 2000, Vietnam’s unemployment rate has continuously declined to reach 2.17% in 2019, according to the IMF, but increased to 2.48% in 2020 and further to 3.2% in 2021 due to the pandemic. The labor market started to improve again last year, with the jobless rate falling to 2.32%.

Vietnam Unemployment graph

Vietnam finally out of the U.S. currency manipulator watch list

In January 2016, the central bank announced a move to a market-based exchange rate mechanism, setting daily reference exchange rates, to discourage hoarding of US dollars.  However, the new rate is not really “free”. The central bank sets a reference rate daily, and local and foreign banks in Vietnam can trade within a band of plus or minus 3%.

In 2019, the US indicated that Vietnam was under scrutiny for possibly manipulating its currency. Then in August 2020, the US Treasury confirmed that the dong was undervalued by about 4.7% against the dollar in 2019 due in part to “government action on the exchange rate.” In December 2020, the Treasury officially labeled Vietnam a currency manipulator, claiming that it “conducted large-scale and protracted intervention, much more than in previous periods, to prevent appreciation of the dong”.

Finally, in July 2021, Vietnam reached an agreement with the U.S., pledging “to avoid manipulating its exchange rate in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage and will refrain from any competitive devaluation of the Vietnamese dong.”

In its December 2021 and June 2022 semiannual reports, the US Treasury stated that it continues to engage closely with Vietnam to monitor the latter’s progress in addressing the U.S. concerns.

Then in its November 2022 report, the US Treasury finally removed Vietnam from the monitoring list for currency manipulation, after the Southeast Asian country exceeded the threshold for the criterion of surplus of trade in goods and services with the United States.

In June 2023, State Bank of Vietnam Governor Nguyen Thi Hong and U.S. Secretary of the Treasury Janet L. Yellen released a joint statement: “The State Bank of Viet Nam (SBV) and the U.S. Department of the Treasury (U.S. Treasury) recognize that we have a significant opportunity to strengthen cooperation toward the shared objective of strong, inclusive, and sustainable growth through well-designed macroeconomic policies and efforts to maintain financial stability. The U.S. Treasury also appreciates the SBV’s ongoing efforts to further modernize and enhance the transparency of its monetary policy and exchange rate management framework, to promote macroeconomic stability, and to ensure the safety and soundness of the banking system.”