Pressing problems for Vietnam property market in 2023 

According to the strong housing market conditions from 2020 to 2022, this year has been tumultuous for Vietnam property market. Interest rates have risen rapidly, leading to housing price falls and a reduction in sales volumes. 

Overview of Vietnam property market currently

While selling prices for properties have declined, rental prices have risen due to escalating demand from overseas migration and fewer first-home buyers. The insufficient supply of rental products has afforded landlords the scope to lift rents. 

Interest rates stop rising

After interest rates had spent the past 8 years doing nothing but getting lower, inflation finally re-emerged in 2022, leading to quick increases in interest rates. 

The cash rate was 0.1% at the start of May 2022, when the State Banks decided to lift interest rates by 25 basis points. Between May 2022 and December 2022, official interest rates have climbed 15 - 16 basis points. 

Research shows that changes to interest rates take between one and two years to affect the market entirely. We’ve had many rate hikes in a short period, so we expect that we are close to the end of the rate hike cycle, but the impact from previous rate rises will be felt well into 2023. 

Will property prices stop falling throughout the year? 

Considering how rapidly interest rates have risen and how much borrowing capacities have fallen, as a result, the price decline has been relatively moderate to date. The price change seen throughout the covid-19 pandemic was one of the strongest periods of property price growth on record, so it makes sense that we see some of those gains reversed. 

We forecast that property prices will continue to decrease throughout 2023 due to additional interest rates going up, further reductions in borrowing capacity, and a slowing overall economic environment. If interest rates were to drop in 2023, the outlook for property prices would change. However, this is unlikely, and if interest rates were to fall, it would probably happen late in the year to boost consumer shopping for TET.

How much higher will rents rise over the coming year? 

Over the past year, we have seen a rapid rent increase due to strong demand and limited supply. Low volumes drive surging demand for first-home buyer purchasing and the ramp-up in migration, while reduced supply is due to fewer investor purchases and heightened selling from investors.

We’ve also seen the strength in rental demand shift from the regional areas that were so popular during the early part of the pandemic to the major capital cities as they come back to life.  

In the overseas migration hotspots of Sydney and Melbourne, inner city unit rents are either cheaper or marginally higher than at the start of the pandemic. 

With demand for inner-city rentals anticipated to grow further over the coming year, we expect rents to continue to increase significantly. With the share of new lending to investors keep sliding and higher interest rates reducing the capacity for borrowers to access an additional mortgage, it seems unlikely there will be a significant change in rental supply in 2023. 

More build-to-rent projects are in the pipeline, especially in the Tay Ho district. However, the volume of products in build-to-rent projects or bought by investors appears insufficient to cater to the rebounding demand for rentals from domestic sources and the ongoing lift in orders from overseas migrants. The ongoing lack of supply is expected to raise renting costs. But when foreigners come to Vietnam, the easiest way to find a new rental home is to contact Tan Long Sales Department. We connect to many landlords around this country, particularly in Tay Ho district, Hanoi city, where many foreigners live now.

Hotline: 0986 720 720

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