Vietnam real estate’s stress is over: Fitch Ratings

Fitch Ratings said the Vietnamese Government’s commitment to curbing the financial bubble in the real estate sector is a positive factor creating stability for the market.

Last year Vietnam started tightening real estate management, focusing on capital mobilization of developers. The move includes stricter regulation on corporate bond issuance.

The proportion of real estate business accounted for 3.4% of Vietnam’s GDP in the first half of this year.

As of June 20, the real estate business continued to hold the third position with total registered foreign direct investment (FDI) of US$1.53 billion, down 51% over the same period last year.

FDI disbursed in this sector was $500 million, down 43%.

Although FDI into the sector declined in the first half of this year, “Vietnam’s real estate market remains attractive to investors,” Fitch Ratings said, citing Nguyen Viet Hoang, business development director at Colliers Vietnam, a real estate research and consulting firm.

Hoang said the number of searches for office buildings, resort and industrial properties in the country has increased in the past few months.

In the housing market, the focus of attention in the first half of the year was on social housing.

Ho Chi Minh City currently has nine projects underway with a total of 6,383 apartments, and prices on the primary market range from $1,200-1,400 per square meters.

Hanoi has 40 social housing projects that are and will be open for sale this year, with most of them being in Long Bien, Nam Tu Liem, Hoang Mai and Thanh Tri districts.

Meanwhile, transactions of high-end apartments and townhouses and villas remained quiet.

The apartment market continued to witness the sale, merger or acquisition of project shares between domestic and foreign investors.

Despite some bright spots, as of the second quarter, Vietnam’s real estate market continued to go on a “bumpy road” with many possible turns ahead, according to David Jackson, general director of Colliers Vietnam.

On the one hand, institutional investors actively sought opportunities to gain bigger market shares. On the other hand, individual investors saw quiet transactions with price fluctuations, low liquidity and cautious sentiment of buyers.

“These two developments will last from now until the end of this year,” Jackson predicted.