Apartment market to continue slumping this year

Decreasing demand for apartments in the region is also forecast to continue through at least the middle of the year. But it may begin to gradually rise by the last quarter of 2023 as legal bottlenecks and obstacles to credit are slated to be at least partially removed by the government, according to DKRA real estate consultants.

DKRA Vietnam deputy R&D director Vo Hong Thang said apartment market liquidity, this year, would concentrate in affordable housing projects with prices of below VND50 million ($2,118) per square meter in HCMC and less than VND35 million per square meter in Binh Duong.

Such social housing projects promise to be a ray of light in the otherwise gloomy 2023 market, he said, while adding the caveat that supply would still be limited.

According to Thang, businesses are gradually supplying fewer high-priced homes and more affordable apartments and social housing units this year. He said this trend may last until 2025, with new supply focusing on the city's neighboring provinces.

He believed selling prices in the primary market may be affected when promotions offering big discounts for quick payment plans are released later this year.

Apartment liquidity and selling prices in the secondary market will continue its downward trend that began in mid-2022 and may last until the end of the third quarter this year.

Savills Vietnam has also estimated that a thinner supply of apartments this year would be the result of several developers having delayed the launch of some 5,000 planned new apartment units.

According to Troy Griffiths, Savills Vietnam deputy managing director, credit availability for real estate businesses will remain limited, so it won't be easy for them to raise more capital.

Meanwhile, Cushman & Wakefield predicted that the fluctuations in liquidity and capital shortages from 2022 will continue through 2023, causing the apartment market to gradually shift to the more affordable segment over the next 2-3 years.

Trang Bui, general manager of Cushman & Wakefield Vietnam, said large developers involved in social housing development are estimated to provide some 2.5 million square meters of new social housing units before 2025.

More affordable housing projects, including apartments, will be announced in the next 12 months, she said.

Tightened credit policies for real estate companies means that developers will offer preferential treatment policies targeting customers with cash in hand, mainly prioritizing fast payment with big discounts to improve sales in 2023, according to Bui.

However, market liquidity will be highly dependent on cash flow, an issue with which both buyers and sellers are currently facing difficulties.

Many property experts said they do not expect a quick breakthrough for the apartment market in the first 9 months of this year. Liquidity and homebuyer confidence will take at least a year to recover, many have predicted.

As credit access, loan interest rates and market sentiment will not change quickly in 2023, the apartment market may remain depressed for longer than expected, experts have argued.