Is the Real Estate Market Due for a Boom in 2025?

13 January, 2025

Why is inflation low despite rising GDP and wages?

In 2024, Vietnam experienced a high GDP growth rate of 7.09%, coupled with a wage increase policy. However, inflation remained remarkably low. This intriguing phenomenon was dissected by experts at a workshop titled “Market and Price Movements in Vietnam in 2024 and Forecast for 2025,” held in Hanoi on January 9, 2025.

TS Le Quoc Phuong, former Deputy Director of the Center for Industry and Trade Information (Ministry of Industry and Trade), attributed the low inflation primarily to the decrease in global inflation, which reduced external inflationary pressures.

Despite the impressive GDP growth, domestic demand remained weak and was the lowest since 2022, as consumers tightened their spending.

Food and commodity prices did not surge significantly, except for a brief period after Typhoon Yagi in September 2024. This stability can be attributed to Vietnam’s position as a significant agricultural producer with abundant sources of supply. Additionally, energy prices (electricity, coal, gasoline, and oil) were regulated and controlled by the government.

Mrs. Nguyen Thi Oanh, Director of the Price Statistics Department (General Statistics Office), provided further insights, suggesting that businesses chose to maintain competitiveness by reducing profit margins instead of increasing prices. She also credited the government’s policies of tax exemptions and reductions, which alleviated inflationary pressures, and the cautious management of prices for goods and services under state control.

The flexible monetary policies implemented by the government also played a crucial role in curbing inflation.

A low-risk real estate market in 2025

In the second part of the workshop, experts delved into the dynamics of the real estate market and various industries. PGS.TS Tran Kim Chung, former Vice President of the Central Institute for Economic Management, anticipated certain risks for the real estate market in 2025, including international risks stemming from geopolitical conflicts and competition among major powers.

However, he predicted that the macroeconomic stability forecasted for 2025 would lead to a stable real estate market. Historically, the real estate market has followed a 10-year cycle, and 2025 is expected to be a year of gains driven by favorable economic policies.

Additionally, there will be minimal policy changes in 2025, as most of the fundamental policies were implemented in 2024. This reduces the likelihood of policy-related risks for the upcoming year.

Apart from unpredictable external factors, there are few indications of significant domestic market fluctuations. Therefore, PGS.TS Tran Kim Chung presented three potential scenarios for the real estate market in 2025.

The first is a neutral scenario, where the market shows signs of heating up but not intensely. This is the most probable outcome, given the context of the latter part of 2024.

The second scenario is a positive one, with the market experiencing a boom and robust growth across all segments. However, this outcome is highly unlikely.

The third scenario is the least desirable, depicting a market downturn. While this is also improbable, it could occur if unexpected external factors come into play.

Forecast: The real estate market in 2025 is expected to remain stable. Photo: NGOC DIEP

Given the potential challenges facing the real estate market, PGS.TS Tran Kim Chung recommended several measures. Firstly, he emphasized the need to accelerate the institutionalization of issues related to the real estate market, particularly the utilization of tax tools and financial derivatives.

Secondly, he urged the swift enactment of the Real Estate Tax Law. Additionally, he suggested exploring the feasibility of financial derivatives such as shared ownership, mutual savings funds, a mortgage refinancing system, and real estate investment trusts.

Mr. Chung also proposed implementing mechanisms such as auctioning land adjacent to infrastructure projects and using the proceeds for infrastructure development, as well as budgeting for local governments to invest in central infrastructure projects and those outside the province (within the context of regional linkage).

PGS.TS Tran Kim Chung further recommended synchronizing urban planning with that of provinces and centrally-run cities. He highlighted the critical importance of harmonizing planning and mapping at the provincial level.

A decade of inflation below 4%

According to data from the General Statistics Office, Vietnam’s consumer price index (CPI) in 2024 rose by 3.63% compared to 2023. This marks the tenth consecutive year that Vietnam has successfully maintained average inflation below 4%.

On average, inflation during the 2015-2024 period stood at 2.8%/year, a significant improvement from the previous decade’s average of 10.2%.

He also suggested focusing on reviewing, unifying, and synchronizing urban development plans, infrastructure, and production in the province through harmonized planning and deployment. This would be accompanied by a provincial action program for urban and rural development, as well as real estate projects.

“The real estate market in 2025 is poised for explosive growth if there is a convergence of factors, including comprehensive institutionalization of relevant documents, synchronized planning, full financialization of derivatives, digitization of market information, and differentiation in land and real estate management,” asserted Mr. Chung.

MINH TRUC

– 15:59 09/01/2025