Vietnam high-end home prices could fall over 10%, expert warnsAs

HO CHI MINH CITY — High-end home prices in fast-growing Vietnam are poised to fall this year as property speculators struggle with higher mortgage costs and are being forced to sell, according to industry executives.

The warnings were made at a conference on Feb. 23, and came only days after the Vietnamese government signaled concerns about the mismatch in the supply of luxury and affordable housing. It urged builders to switch to less expensive homes even at the risk of incurring temporary losses.

Bach Ta, director of capital markets transactions at property services company JLL, said that prices for higher-end homes in Vietnam could drop by 10% or more in 2023 before rebounding in 2024 as heavily leveraged homeowners sell their holdings and push more supply into the market.

“Those stocks will compete with new stocks,” he said at the conference.

The falling prices for high-end apartments represent a rare reversal for Southeast Asia’s fastest-growing economy, which has seen turmoil in the real estate sector linked to a slowdown in lending. The declines follow an official crackdown on corruption in the property and bond markets that intensified last year.

The State Bank of Vietnam said on Friday that instead of focusing on “those with real needs for housing,” there has been too much “speculation, price manipulation for profit,” and borrowing in the high-value housing segment.

Credit growth last year was 24% in the real estate sector compared with 14% in the broader economy, the central bank said, adding its overall credit growth target is 14-15% for 2023.

Prime Minister Pham Minh Chinh called last week for a greater emphasis on affordable housing, warning developers at a property forum that “no one is rescuing” them.

“You can’t expect to make a profit even in times of difficulty,” Chinh said, according to the state website. “No one is going to hold your hand all through the night.”

The government is weighing several policies to increase the supply of social housing and workers’ housing, including a 110 trillion-dong ($4.6 billion) credit package proposed by the construction ministry.

Participants at the property conference said industry practices are already changing.

“The behavior of using leverage will change — absolutely people will be more cautious about that,” Vinacapital Managing Director Hieu Do said. “The behavior of short-term flipping and trading activities will change significantly. It’s almost vanished from the market.”

Ta said sellers are offering steep discounts on apartments, while Paul Fisher, JLL Vietnam country head, added that they are also trying to attract buyers with gift cards or free furniture while keeping official prices at current levels.