The New Real Estate Landscape: Insights from Expert Can Van Luc

6 February, 2025

Inflation is No Longer a Concern

Looking back at the past three years (2022-2024), the global economy has been stagnant, with the positive aspect being that we avoided a recession as initially predicted.

The economic growth trajectory of the world and several individual economies shows that global growth in 2024 is expected to match last year’s at 3.23%, while Vietnam’s growth is projected to be around 6.6%. According to senior economist Can Van Luc, “If we don’t do anything and there’s no revolution, we can still maintain a growth rate of 6.5-6.7%. But if we are determined to bring about change, we can achieve more than 7%.”

Parallel to economic growth is the issue of inflation. According to Mr. Luc’s statistics and forecasts, except for 2020 when the global economy contracted due to COVID-19, the average growth rate for the period 2019 to 2026 is 3-3.2%, which is significantly lower than the inflation rate. This indicates that the world economy is facing more challenges and uncertainties. However, Vietnam maintaining a 7% growth rate is a remarkable achievement, he noted.

Currently, the world has passed the peak of inflation, and from now until the end of 2026, the prices of basic commodities such as energy, food, and metals are expected to remain relatively stable. Oil prices are projected to hover around $75-80 per barrel, not too high, and they could even drop to $70 if countries start utilizing nuclear energy or other non-fossil fuel sources, as Europe and the US have been doing in the past years.

With inflation no longer a concern for the 2024-2025 period, economies have started reducing interest rates. It is predicted that the US and other major central banks worldwide will continue cutting interest rates until the end of 2026, possibly reaching around 3.5-3.6%. As Vietnam deeply integrates into the global economy, we follow a similar path, deciding to lower interest rates from March 2023. Essentially, we have been reducing lending rates since then, and compared to the peak, they have decreased by an estimated three percentage points.

Mr. Luc assessed that the interest rates are quite favorable for the real estate market last year and this year. However, why aren’t people borrowing more money to buy homes? The main reason is the high property prices, which are simply unaffordable for many.

What is the Biggest Risk for the Economy?

Speaking about the biggest risk to the economy, the expert believes it is the geopolitical risk, which remains complex, with increasing strategic competition among major powers, trade fragmentation, and protectionism on the rise. The election results in many countries, especially the US (with the return of President Donald Trump), could also have an impact. Secondly, inflation and interest rates, though decreasing, are still high, and public and private debt risks remain significant. Thirdly, the slow recovery in some countries (Japan, the UK, and China…) will likely lead to a slight decrease in global growth in 2024-2025 compared to 2023, with a gradual improvement expected in 2026. Lastly, energy and food security risks persist, along with the ever-present threat of climate change.

However, Vietnam has done an excellent job in maintaining political stability and achieving economic development. Evidence of this is our country’s economic growth, which is among the highest in the region this year, and is expected to reach at least 6.8% next year, with inflation at 3.5-4%. Maintaining low-interest rates, coupled with a per capita income that is 20% higher than pre-COVID-19 levels, sets a solid foundation for the safe and sustainable development of the real estate market in the coming years, according to Mr. Luc.

However, he noted that consumers’ behavior has changed significantly, and they have become more cautious, intelligent, and economical in their spending.

Mr. Can Van Luc sharing insights at the VRES 2024 Real Estate Conference on December 5, 2024.

Business Orders Recover but Profit Margins Narrow

Regarding exports, Mr. Luc forecasts a positive recovery, with export growth for the year expected to reach around 15%, compared to a negative 4.4% last year. Vietnam’s trade balance has improved, with surpluses in many markets such as the US, ASEAN, South Korea, the EU, and Japan. However, we have a trade deficit with China, as our imports from this market increased by nearly 32%, the highest among the major markets. This indicates a shift in goods from China to Vietnam, destined for other markets, including the US. With Trump’s return to the presidency, Vietnam needs to pay close attention to this issue.

On the other hand, Mr. Luc also assessed that businesses are seeing a good recovery in orders, but these are short-term orders, ranging from six to twelve months, and foreign partners are not allowing price increases, which is narrowing profit margins for Vietnamese companies.

Another issue is the labor shortage in many sectors, such as textiles, footwear, and wood processing, despite Vietnam having a large workforce. As a result, businesses will have to accept the “collect wood for three years and burn it in one hour” approach to prepare their workforce. The lesson learned from the recent past is that during difficult times, businesses that laid off workers found it challenging to get them back. So it’s crucial to retain employees even when times are tough.

Regarding exchange rates, the market has experienced significant fluctuations, but the State Bank has flexibly managed the situation using various tools to keep rates stable. The rate is estimated to have increased by about 3.5-4% for the year, mainly due to the strengthening of the US dollar. According to Mr. Luc, this is acceptable and relatively low compared to other regions. Additionally, Vietnam has been on the watchlist for currency manipulation in the past, and we need to be prepared for the possibility of it happening again. Our country has the experience to handle such situations effectively.

In terms of public investment, disbursement remains slow. The private sector grew by only about 7.1% in the first nine months, an increase of two percentage points compared to last year but only half of the pre-pandemic level. This indicates that individuals and private enterprises are still hesitant to invest heavily.

As for the stock market, Mr. Luc predicts an 11% increase this year, with many “green” sectors and fields seeing a rise in stock prices of 50-60%. As of the end of November 2024, telecommunications led the pack with a 238% increase, followed by industrial goods and services at 75%, information technology at 69%, and entertainment and tourism at 41%, while real estate stocks remained stagnant. This can be attributed to a lack of transparency, insufficient enterprise capacity, or investor reluctance to invest.

In terms of attracting foreign direct investment (FDI), it is estimated that investment in Vietnam could increase by at least 5-6% or, more optimistically, 7-8%. South Korea, Singapore, Japan, and Taiwan are the leading sources of FDI currently, but Mr. Luc hopes that the US will move up from 11th place and enter the top 7, following the upgrade of the comprehensive strategic partnership between the two countries in September last year.

Regarding tourism, international arrivals in the first ten months of this year exceeded 14.1 million, a 41% increase compared to the same period last year. However, revenue from tourism, accommodation, and catering services only increased by about 11%, indicating that visitors are spending more cautiously.

The expert also drew attention to Vietnam’s institutional and legal environment. The General Secretary mentioned two crucial goals, which Mr. Luc described as “revolutionary.” He explained, “First is the breakthrough in the institutional aspect, where we need to innovate in law-making and law enforcement. All obstacles will be promptly addressed. This is extremely important for the real estate market.

Secondly, there will be a revolution in organizational structure, making it more streamlined, with fewer intermediaries. As a result, enterprises will become more robust, healthy, and sustainable, and people will benefit. So, let’s prepare for this new era with the right mindset.”

Real Estate Prospects in the New Context

In this new context, the real estate market is supported by breakthroughs in institutions and organizational structures, economic growth, macroeconomic stability, improved infrastructure, and easier access to capital. The most challenging period regarding financial obligations is behind us, and we are now witnessing a better balance between supply and demand, with real estate prices becoming more reasonable.

Tien Vu