Vietnam's Apartment Market Faces 'Exit Pressure' as Handover Nears

In Vietnam's urban centers, particularly Hanoi, a notable trend is emerging as early apartment buyers rush to 'exit' their investments with handover dates looming. However, declining market liquidity has led to a situation where securing buyers, even with significant discounts from initial purchase prices, is proving difficult. For instance, a woman in her 30s who purchased an apartment in a new project in eastern Hanoi for nearly VND3 billion (approximately $118,000) has paid over half the contract value. She faces a critical deadline next month to pay another 45%, equivalent to nearly VND1.4 billion ($55,000). Despite listing her property for sale for over two months, she has yet to find a buyer, even after offering a VND150 million ($6,000) reduction from her original purchase price. She expresses regret for not selling during the market's peak. Similarly, a man who bought an apartment in a different project in western Hanoi for around VND4 billion ($157,000) is facing a payment of nearly VND2 billion ($78,000) soon. Coupled with rising interest rates, he is willing to offer a VND200 million ($7,800) discount for a quick sale. This starkly contrasts with earlier periods when buyers were scrambling to secure units. According to a recent market report by the Vietnam Association of Real Estate Brokers (VARS), price adjustment pressures are concentrated in projects entering the handover phase, forcing early buyers to settle the majority of their remaining contract value. Buyers from 2023-2024 are revising their profit expectations downward, while those who bought at the peak are accepting losses to sell. Data from online real estate platforms also indicates a cooling in asking prices for many apartment projects, with reductions ranging from 8% to 13% compared to their peak. This is attributed to early investors, who often aimed for short-term speculative gains, now facing the dual pressure of substantial handover payments and increased interest rates, leading to financial strain. Experts point out that investors, especially those who heavily utilized leverage, are increasingly attempting to 'exit' their properties as handover dates approach, necessitating large sums of money. However, given the current high price points and rising interest rates, it is difficult for new buyers to readily commit billions of Vietnamese dong, which could further dampen market liquidity. Mr. Vo Huynh Tuan Kiet, Director of Residential Market at CBRE Vietnam, notes that recent apartment transactions have been primarily driven by investment and speculation rather than genuine housing needs, with elevated prices acting as a barrier for owner-occupiers. He warns of a potential market freeze similar to the 2007-2011 period, when rapid price increases and credit tightening led to a near-complete halt in transactions. Looking ahead, Hanoi is expected to see over 28,000 apartments from approximately 80 projects and sub-projects handed over by 2028, intensifying the selling pressure. The cost of capital is directly impacting market liquidity, with real estate loan interest rates commonly ranging from 12-14% annually, and floating rates climbing to 15-16%. Experts advise current apartment investors to proactively reassess their financial capabilities and implement risk management strategies. Those who have over-leveraged are encouraged to negotiate loan restructuring with banks for deferred payments or to expedite sales with controlled losses, rather than incurring further financial costs.