Residential market – Expectations for a broader recovery
- Within the framework of the residential industry, we believe that the land law has provided a relatively complete legal framework, which has a clear impact on companies in the industry: 1/ The residential real estate sector will be developed more sustainably, reducing the phenomenon of investors those consolidate agricultural land and develop projects that are inconsistent with local general plans; 2/ For developers with land funds that are facing legal issues, their projects will have to wait until 2025, when the amended Land Law comes into effect and the guiding Decrees are completed, to be able to continue the legal process to put them into operation.
- The major points of the Land Law (amended) including: 1/ Provide regulations to ensure consistency of the planning system; 2/ Projects which will be directly recovered by the State (Social housing projects, Urban area projects with various service functions, investment projects to renovate and rebuild apartment buildings, sea reclamation projects for socio-economic development purposes,…); 3/ Detailed regulations on cases of land allocation through (a) auction of land use rights, (b) bidding for investor selection and (c) agreement on obtaining land use rights; 4/ Specific regulations on valuation methods to determine land prices and applicable conditions (Articles 158 with 04 methods), whereby land use fees will be calculated closer to market prices, increasing efficiency in state budget collection activities, but will also increase project’s development costs in the future (Residential land prices maintain a long-term upward trend).
- For tier-I cities, we believe that units serving residential needs (especially the apartment segment) will continue to be promoted for sales in 2024. For low-rise units, we expect secondary prices to recover more significantly in the 2H2024, thereby supporting sales of these unis in the primary market. For tier II cities, given secondary market shows no signs of bottoming out and recovering, we believe that the primary market and sales events in tier-II cities will also recover more slowly than in tier-I cities.
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