Vietnam’s Residential Property Market Analysis 2024

Vietnam's residential property market remains healthy, buoyed by increasing demand amidst falling interest rates, and supported by the country's recovering tourism, increasing foreign direct investment, and strong economic fundamentals.

Table of Contents

• Housing Market Snapshot
• Demand Highlights
• Supply Highlights
• Historic Perspective
• Rental Market
• Mortgage Market
• Socio-Economic Context

Housing Market Snapshot

In Hanoi, the country's capital city, the average price of apartments continued to rise strongly by 10.1% (5.9% inflation-adjusted) to US$2,210 per square meter (sqm) in Q1 2024 from a year earlier, following a year-on-year increase of 16.1% in Q1 2023, based on figures released by JLL Vietnam.

On a quarterly basis, Hanoi apartment prices increased 2.6% during the latest quarter (1.5% inflation-adjusted).

In Ho Chi Minh City (HCMC), the growth in apartment prices is more subdued. In Q1 2024, apartment prices rose by a meager 1.1% (and actually dropped 2.7% when adjusted for inflation) from a year earlier, to an average of US$3,266 per sqm. This is a sharp slowdown from the prior year's 10.3% year-on-year increase.

Quarter-on-quarter, apartment prices in the HCMC were up by 1.5% (0.4% inflation-adjusted) during the latest quarter.

Vietnam's house price annual change

Demand is increasing. In Hanoi, apartment sales surged by 99% while villa and townhouse sales skyrocketed by 110% y-o-y in Q1 2024, based on Savills report. Similarly in HCMC, the number of apartments sold rose by 29% and by a whopping 143% for villas and townhouses over the same period.

Vietnam opened up to foreigners nine 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 from investing 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 weak, as funding woes and insolvency continue to beset the sector. "In 2023, Hanoi and HCMC witnessed decade's low new supply due to impacts from macro headwinds, recording nearly 13,000 units and slightly over 8,700 units, respectively," said CBRE in its Vietnam Market Outlook 2024 report.

The residential property market is expected to remain stable this year. "Condominium prices in Hanoi are on the upward trend, up by nearly 15% y-o-y while HCMC witnessed a flattening price trend," said CBRE. "Towards 2024, factors including stabilizing interest rates and upcoming amendments to policy and legal framework will elevate buyers' sentiments and foster market recovery."

The overall economic outlook remains positive. The Vietnamese economy grew by 5.66% in Q1 2024 from a year earlier, following year-on-year expansions of 6.72% in Q4 2023, 5.47% in Q3, 4.25% in Q2, and 3.41% in Q1, according to the figures from the General Statistics Office (GSO). The strong economic growth was mainly attributed to the continued growth in the services sector, which accounts for almost half of the country's total GDP.

For 2024, the government targets an economic growth of between 6% and 6.5%, after growing by 5.05% in 2023 and 8.02% in 2022.

Demand Highlights

Sales Increasing Again

Residential property demand in Vietnam, particularly in Hanoi and HCMC, is noticeably improving again, amidst declining interest rates and robust overall economic growth.

In Q1 2024, the absorption rate reached nearly 31% translating into 6,200 transactions, an increase of 8% as compared to the previous quarter and double that of the same period last year, according to the Vietnam Association of Realtors (VARS).

In Hanoi:

• For apartments, total sales soared by a whopping 99% y-o-y to 5,308 units in Q1 2024, according to Savills. Quarter-on-quarter, apartment sales were up by 74%. The market absorption rate was 45%.
• For villas and townhouses, there were 185 units sold in Q1 2024 - up by a huge 189% from the previous quarter and by 110% from the same period last year. About 63% of the newly-launched properties were absorbed.

In HCMC:

• Apartment sales rose by 29% y-o-y to 1,116 units in Q1 2024, according to Savills. Yet on a quarterly basis, sales dropped 63% in Q1 2024. The market absorption rate stood at 23% - 18 percentage points lower than the previous quarter but 10 percentage points higher than a year ago.
• Sales of villas and townhouses rose sharply by 72% q-o-q and by 143% y-o-y to 112 units in Q1 2024. The absorption rate was 15%, up by 6 percentage points from the previous quarter and by 8 percentage points from a year earlier.

Supply Highlights

Apartment Supply Increasing in Hanoi but Falling in HCMC

In Hanoi, there were 4,062 new supply of apartments in Q1 2024, up by a huge 41% from the previous quarter and by 99% from a year earlier, based on figures from Savills.

The total stock of apartments stood at 12,928 units in Q1 2024, up by 9% q-o-q but still down by a huge 34% y-o-y. Nam Tu Liem, Bac Tu Liem, and Cau Giay accounted for nearly half of the total primary stock of apartments in the capital city.

For the whole year of 2024, about 12,300 new apartment units from 12 new launches and the next phases of 2 projects will enter the market. About 82% of these expected new units will come from Nam Tu Liem, Ha Dong, and Dong Anh.

"Amended laws are expected to give the housing market room to grow. From 2025 onward, approximately 84,400 units from 101 projects will enter," said Savills in its Q1 2024 Ha Noi Market Brief. "Products in satellite provinces will increasingly meet Ha Noi's housing demand. Hung Yen and Bac Ninh will provide approximately 203,000 units from 2024 to 2026 onward." This means that these districts will account for a large share of supply in the coming years.

In HCMC, on the other hand, new apartment supply plunged by 78% q-o-q and 61% y-o-y to 633 units in Q1 2024. This was mainly due to delayed launches in 2 projects and the temporary halt of sales in 9 projects due to incomplete legal requirements or sale policy adjustments, according to Savills.

HCMC had a total primary stock of 4,922 units in Q1 2024, down by 35% from the previous quarter and by 28% from a year ago. District 9, Binh Tan, and Binh Chanh accounted for a cumulative share of 82%.

About 8,400 additional units from 25 new launches and 3 new projects are expected to be delivered by the end of this year.

"Notable future projects are Khai Hoan Prime, Vinhomes Grand Park - The Opus One, Eaton Park, and The Global City. Lowering the cost of debt will further boost demand and support new projects," said Savills in its Q1 2024 HCMC Market Brief.

Supply of villas and townhouses remains limited

In Hanoi, there were 93 new villas and townhouses entered the market, up by 7% q-o-q and by a whopping 221% y-o-y in Q1 2024. The new supply came from Solasta Mansion, an existing project in Ha Dong, and new units from Him Lam in Thuong Tin.

Despite this, the total primary stock of villas and townhouses fell by 6% q-o-q and 12% y-o-y to 665 units from 16 projects.

By end-2024, 2,977 dwellings from 13 projects are expected to enter the market.

"Dong Anh District will have a lion's share with 34% of the future stock with a mega project, followed by Ha Dong with 19% and Hoai Duc with 16%," said Savills. "Laws relating to real estate were passed, plus continuing infrastructure development, upcoming mega projects, and buyers' returning confidence all signal a promising year for the Ha Noi real estate market."

In HCMC, on the other hand, the new supply was limited to 42 units, up by 56% from the previous quarter but still down by 11% from a year earlier. The new supply came solely from a new project, Dong Tang Long-Hung Gia, with units priced at around VND 10 billion (US$393,437).

The primary stock of villas and townhouses in HCMC was stable q-o-q but up by 13% y-o-y to 762 dwellings in Q1 2024. Thu Duc City accounted for about 85% share of the primary supply, followed by Districts 8, 12, Binh Chanh, Binh Tan, Nha Be, and Tan Phu.

For the rest of 2024, the future supply of newly built villas and townhouses in HCMC is predicted at 1,149 units, based on projections released by Savills.

"New projects represent just 34% with some notable projects like Foresta, The Meadow, and L'Arcade. They obtained construction permits. Most of the future supply will be townhouses and with dwelling prices above VND 20 billion," said Savills. "By 2026, future supply is expected to reach 4,845 dwellings."

Historic Perspective

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$196.7 million) credit to homebuyers through Vietinbank. These measures were, over time, successful.

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.

Rental Market

Apartment rents in Hanoi are more or less steady; supply expected to increase

In Hanoi, the average asking rent for Grade A apartments was US$27.9 per sqm per month in Q1 2024, down slightly by 0.4% from a year earlier, according to CBRE. On a quarterly basis, rents were also slightly lower by 0.4%. On the other hand, Grade B apartments' average monthly rent rose by a meager 0.1% q-o-q to US$17.6 per sqm.

Overall, the market rent for serviced apartments stood at an average of US$25.7 per sqm in Q1 2024.

The average vacancy rate for both grade projects combined was registered at 24% in Q1 2024. 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 5,072 units in Q1 2024. Grade A serviced apartments dominated the market, representing for about 79% of the total supply.

Hanoi's serviced apartment market is expected to see an additional supply of over 3,186 new units in the next three years.

"The majority of these units will be Grade A apartments operated by renowned international brands. This reflects a growing demand for upscale and high-quality serviced apartments, as well as a growing interest from international players in the market," said CBRE.

"Among the seven upcoming projects, one is scheduled to open in 2024, adding a total of 261 units to the overall supply. Furthermore, in 2025, the market is expected to receive over 2,200 units from two major projects, namely Somerset West Central Ha Noi and Tay Ho View Complex," added CBRE.

Low to moderate rental yields

In Q1 2024, the average gross rental yields in Vietnam - the return earned on the purchase price of a rental property, before taxation, vacancy costs, and other costs - stood at 3.84%, down from 4.02% in Q3 2023, according to the Global Property Guide. Gross rental yields in Hanoi, Ho Chi Minh City, and Da Nang can be low to moderately good, depending on location.

• In Hanoi, gross rental yields range from 1.52% to 5.07%, depending on the district but still, the overall average for the city is 3.7%.
• In Ho Chi Minh City, yields are slightly higher, at between 2.7% and 5.39%, again depending on the district. The average for the city is 4%.
• In Da Nang, the rental yields are between 3.17% and 4.25% with an average of 3.81%.

Mortgage Market

Interest rates falling, mortgage market still underdeveloped

In March 2024, the State Bank of Vietnam (SBV), the country's central bank, held its benchmark refinancing rate unchanged at 6.00%. However, SBV slashed its annual rediscount rate, overnight electronic interbank rate, and interest rate for loans by one percentage point each to boost lending growth and buoy economic activity. The recent move was the first since October 2020, following successive rate hikes over the past year.

The benchmark refinancing rate is currently at 4.50% while the discount rate is at 3.00%.

Recently, 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.

Many banks in Vietnam have rolled out mortgage packages with interest rates fixed at 5% to 6% as of April 2024, the lowest level recorded in the past decade.

At Shinhan Bank, fixed interest rates for mortgages are currently at around 5.5% to 6% annually, nearly half the 9% to 10% rate prevalent in Q2 2023, said Nguyen Thanh Hai, the bank's regional head at its HCMC branch.

At state-owned banks Agribank, Vietcombank, VietinBank, and BIDV, the fixed interest rates on mortgage loans hover around 5% to 7%.

At private lenders such as BVBank, SHB, and ACB, fixed mortgage interest rates range from 5% to 8%.

Fixed interest rates for mortgages, Q1 2024
Bank	Fixed interest rate (%)	Period
Shinhan Bank	5.5 - 6.0	6-36 months
Woori Bank	5.1 - 5.7	12-36 months
BIDV	5.0 - 5.5	6-12 months
Vietcombank	6.3 - 7.5	6-36 months
Agribank	6.5	24 months
BVBank	5.0 - 7.5	5-12 months
ACB	7.3 - 8.0	3-12 months
Source: VN Express International

Accordingly, floating mortgage interest rates are also declining by two to three percentage points at some banks. State-owned banks offer 9% to 10% rates while private financial institutions charge rates above 12%.

Floating interest rates for mortgages, Q1 2024
Bank	Floating interest rate (%)
Shinhan Bank	8.5
Woori Bank	8.7
Vietcombank	9.0
BVBank	9.5
VIB	9.0 - 10.0
TPBank	11.6 - 12.1
HDBank	12.0 - 12.5
Source: VN Express International

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.

Socio-Economic Context

Amendments to Housing, Land, and Real Estate Laws to usher in positive changes

Vietnam opened up to foreigners nine 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 are 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 amended its Land Law and the related Housing Law last year. The amended laws were approved in November 2023 but will take effect from January 1, 2025.

"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.

As of 2023, 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.

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 now being felt after the removal of Covid-related restrictions and as economic activity returns to pre-pandemic levels.

Foreign investments increasing again

During 2023, foreign direct investment (FDI) surged by 32.1% to US$36.61 billion from a year earlier, following a year-on-year decline of 11% in 2022, based on figures from the Ministry of Planning and Investment.

Foreign capital inflows continue to rise this year, with the total newly registered capital, adjusted capital and capital contributions, and share purchases of foreign investors increasing by 2% year-on-year to US$11.07 billion in the first five months of 2024. In fact, it was the highest registered for a comparable period in the past five years. Likewise, total implemented capital amounted to US$8.25 billion over the same period, up by 7.8% from a year earlier.

FDI in real estate reached more than US$2.47 billion, up by a whopping 61.5% from the previous year.

The biggest contributor was Singapore with around US$5.58 billion investment, representing about 36.7% share of the total FDI registered in Vietnam in the first five months of 2024. It was followed by Japan with an 11.4% share, Hong Kong, South Korea, and China.

Bac Ninh led the other provinces and cities in attracting foreign investment, accounting for a 17% share of the total FDI, followed by Vung Tau (10.1% share), and Quang Ninh (9% share). Ha Noi, Hai Phong, and Ho Chi Minh City came next.

Strong economic growth, recovering tourism

The Vietnamese economy remains strong. In Q1 2024, the economy grew by 5.66% from a year earlier, following year-on-year expansions of 6.72% in Q4 2023, 5.47% in Q3, 4.25% in Q2, and 3.41% in Q1, according to the figures from the General Statistics Office (GSO). The strong economic growth was mainly attributed to the continued growth in the services sector, which accounts for almost half of the country's total GDP.

For 2024, the government targets an economic growth of between 6% and 6.5%, after growing by 5.05% in 2023 and 8.02% in 2022. However, the 2024 economic growth forecast for Vietnam released by the World Bank and the International Monetary Fund (IMF) are more conservative at 5.5% and 5.8%, respectively.

"After experiencing a slowdown in 2023, the economy is showing mixed signs of recovery in early 2024. While exports are recovering, consumption and private domestic investment are growing more gradually," said the World Bank.

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 continues to recover, but is still below its pre-pandemic levels. During 2023, there were more than 12.6 million foreign visitors in Vietnam, up by a spectacular 244% from a year earlier, according to the country's GSO. Yet it remains 30% below the 18 million visitor arrivals 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 five months of 2024, Vietnam welcomed nearly 7.6 million foreign visitors, up by a huge 64.9% from the same period last year. By means of transport:

• By airways: 6.34 million foreign visitors, about 1.6 times higher as compared to a year ago
• By sea: 1.08 million foreign visitors, about 2.1 times higher than a year earlier
• By land: 162,400 foreign visitors, around 3.2 times higher compared to the same period last year

Korea accounted for the biggest share of about 25.7% of total international visitors in Vietnam in Jan-May 2024, followed by China (21.2%), Taiwan, the United States, Japan, Malaysia, Australia, Thailand, Cambodia, and India.

Annual inflation stood at 4.34% in June 2024, slightly down from 4.44% in the previous month but still far higher than the 2% recorded in the same month last year, according to figures from GSO. Despite this, it remains within the central bank's inflation target of under 4.5%.

Inflation slowed to an annual average of just 3.2% from 2013 to 2023, from an average of 11% from 2004 to 2012.

The country's unemployment stood at 2.26% in Q4 2023, at par from 2.3% 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 in recent years, with the jobless rate falling to 2.32% in 2022 and to 2.01% in 2023.