Vietnam shifts into new real estate cycle

Vietnam shifts into new real estate cycle

A new real estate cycle is taking shape in Vietnam, driven by tighter capital, regulatory reform and shifting buyer behaviour, writes Jerry Nguyen, a board member and deputy general director of Investment and International Market Development at Hoa Binh Group.

In recent months, a broad consensus has emerged within Vietnam’s real estate community: the market is neither “dead” nor reverting to the familiar playbook of previous cycles.

In earlier upturns, recovery and expansion were driven by a predictable combination of loose credit, rapidly rising land prices, speculative sentiment and heavy financial leverage. When these forces aligned, projects could be launched and absorbed quickly, often within a compressed timeframe.

From 2026 onwards, however, those drivers no longer define the market. The key differentiator between developers is not the size of their land banks, but their ability to transform land into products aligned with real purchasing power, financed by long-term capital and managed according to standards recognised by capital markets.

The market is entering a phase of structural selection. Capital is no longer distributed broadly; it is concentrating among developers capable of generating genuine cash flows, managing risk prudently and operating with transparency.

History suggests such periods are part of a broader evolution. After the 2008 US financial crisis, the 1997 currency crisis in South Korea and the collapse of Japan’s property bubble, real estate markets did not disappear, but their underlying business models were fundamentally reshaped.

Macroeconomic foundations

One of the strongest arguments for the emergence of a new cycle lies in Vietnam’s long-term urbanisation trajectory. Under national urban-rural development plans, the urban population is expected to exceed 50 per cent by 2030 and could approach 70 per cent by 2050.

Urbanisation generates far more than housing demand. It drives the need for integrated urban systems, including transport infrastructure, logistics, healthcare, education, commercial services and public amenities. In this context, real estate is no longer merely a commodity; it is an essential component of economic infrastructure.

Yet, Vietnam’s urbanisation is unfolding in a markedly different financial environment from previous cycles. The era of cheap capital has ended. Banks and investors are operating with greater caution, focusing less on individual projects and more on corporate resilience and long-term cash flow sustainability.

The early implementation of revised land, housing and real estate business laws from August 1, 2024 has accelerated this restructuring. While these reforms have introduced short-term compliance costs and procedural pressures, they also serve as institutional infrastructure for the next cycle, one in which transparency and standardisation are mandatory rather than optional.

From legacy models to three pillars of resilience

In previous cycles, many developers operated along a short value chain: land acquisition, development and sales. This model could generate rapid returns during boom periods but proved fragile when financial conditions tightened.

In the new cycle, three interdependent pillars are decisive: long-term capital, products aligned with real purchasing power, and institutional-grade governance. The absence of any single one weakens the entire model.

Vietnam’s capital requirements over the next two decades extend far beyond housing, encompassing climate-resilient infrastructure, renewable energy, public transit and adaptive urban redevelopment. The country’s commitment to net-zero emissions by 2050 is reshaping capital allocation.

Buildings and construction account for roughly 34-40 per cent of global energy-related carbon emissions. In net-zero transition pathways, around 30-40 per cent of climate investment typically flows into urban infrastructure and the built environment. Applied to Vietnam, green capital requirements could reach $670–700 billion by 2050, with real estate and construction accounting for approximately $230-250 billion between 2026 and 2050.

This capital will not flow indiscriminately. Access to green and long-tenor financing increasingly depends on rigorous standards of governance, transparency and impact measurement. Integrating emissions targets, life-cycle assessment data and environmental product declarations into development processes is becoming a prerequisite for lower-cost funding.

Liquidity remains central, but it is no longer driven by marketing narratives or short-term price expectations. It depends on whether products genuinely match household incomes, mortgage structures and lived housing needs.

There is significant unmet demand among households earning VND10-35 million ($400-1,400) per month in major cities, yet supply of affordable commercial housing remains constrained by regulatory bottlenecks and land limitations. This is not simply a social issue; it is a strategic test of developers’ ability to recalibrate their product mix.

Following recent volatility, the market is shifting decisively from speculative buying towards owner-occupier demand. Buyers increasingly prioritise operational costs, management quality, parking provision, schools and access to public transport over expectations of rapid capital gains, a pattern consistent with more mature markets.

Capital providers are no longer assessing developers solely on a project-by-project basis. Instead, they evaluate enterprise-wide governance, financial discipline and risk management across portfolios.

Globally, leading real estate groups have evolved into urban development platforms, managing assets throughout their life cycles, from planning and construction to operation and reinvestment. Corporate value increasingly derives from stable, recurring cash flows rather than one-off sales.

What distinguishes top-tier developers is discipline: in leverage, in quality control and in transparency. They operate long-term urban systems rather than pursuing short-term project cycles.

Three sets of signals point to the onset of this new phase.

Capital signals: funding costs and credit conditions are increasingly tied to environmental, social, and governance performance, transparency and cash flow resilience. Developers that fail to upgrade standards face higher costs and shorter tenors.

Buyer signals: demand is concentrating in affordable and well-connected urban segments. Projects misaligned with purchasing power face extended absorption periods.

Institutional signals: policy reforms are driving standardisation and raising compliance thresholds, reshaping the competitive landscape in favour of developers capable of meeting institutional benchmarks.

The previous cycle resembled a sprint, where speed and leverage defined success. The new cycle is a marathon. Sustainable capital structures, disciplined execution and product-market alignment now determine outcomes.

Land banks mark only the starting line. Reaching the finish depends on management capability and adaptability. Vietnam’s new real estate cycle has indeed begun, but it will not favour every developer. Leadership in this phase lies in deliberately building institutional strength to navigate a more selective and demanding market environment.

VIR