Vietnam struggles to find new ways to stimulate real estate market amid falling investor confidence

Following the Vietnamese government's restrictions on the national economy to combat global risks, as well as a series of anti-corruption decisions, many of the country's developers have been hit. Investor confidence has been shaken, and the largest companies in the construction sector have seen a significant drop in value amid news of new reporting requirements and tighter conditions for business loans.

The government's actions seem reasonable given the risks created by the actions of developers in previous years. Even before the pandemic, Vietnam's construction sector was growing at an exceptionally high rate, based largely on abundant credit and speculation in the growing bond market. Credit played an even bigger role during the pandemic. Now the whole world is teetering on the brink of falling into an economic crisis of unbelievable proportions, so the sector's overleveraging carries enormous risks for Vietnam and its banking sector.

However, the state's preparation for possible shocks is already causing problems. While the bonds of large developers are falling and investors are in doubt, hundreds of small companies have already filed for bankruptcy and thousands of projects have been frozen. Although the situation is not irreversible, it urgently requires government support. Concrete decisions have not yet been announced, but experts are already predicting what steps will be taken.

One of the main predictions is that the government will ease the strict credit conditions - more accessible money under still serious supervision. At this point, pricing controls on land sales in the market have already been relaxed, which will allow prices to be closer to those justified by the market. Lending rates have also been lowered four times in a row to compensate for the tighter requirements. Additional funds have also been allocated for the construction of social housing, which will boost the sector's construction capacity and prevent it from stagnating.