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Consequences of Decree No. 08/2023/ND-CP on Vietnam’s real estate market

Decree No. 08/2023/ND-CP (“Decree No. 08”) newly issued by the Government of Vietnam on March 5, 2023 amending, supplementing and suspending the implementation of a number of articles in Decrees stipulating private offering and trading of corporate bonds in the domestic market and the offering for sale of corporate bonds in the international market. Decree No. 08 is expected to bring many positive changes to the real estate market. In this article, ASL LAW will analyze the nature of Vietnam’s real estate market and the impact of Decree No. 08 on this market.

First, it should be noted that Decree No. 08 is a Decree regulating regulations on corporate bonds, not a Decree regulating the real estate market such as the Land Law or the Law on Real Estate Business, etc.

However, at present, a key source of capital that most Vietnamese real estate businesses mobilize comes from the private issued corporate bond channel. Specifically, businesses will issue corporate bonds to the market, investors will buy bonds with a specific par value depending on each issued bond lot.

Enterprises will use that capital to carry out business activities and develop quickly instead of just using the available money of the business itself.

However, in 2022, the corporate bond market and Vietnam’s real estate market experienced many fluctuations, from the collapse of Tan Hoang Minh Group, Van Thinh Phat leading to the credit tightening policies by the State, the banking sector, etc. and stricter control of the real estate market, most notably by limiting real estate speculation, inspecting and examining unfinished real estate projects,…

Vietnam’s real estate market and corporate bond market are going through one of the worst periods since the country’s founding. That is why many real estate investors and businesses have been waiting for the promulgation of Decree No. 08 and before that the Draft Decree amending Decree No. 65/2022/ND-CP.

One of the main contents mentioned in Decree No. 08 is interpreted as a method to ‘save’ the real estate market through allowing bond issuers to negotiate and reach agreements with bondholders on the payment of bond principals and interests due with other assets or extending the payment term of bond principals and interests to a maximum of 2 years compared to the initial bond issuance plan.

Accordingly, bond issuers will have two options to solve the current predicament, through extending the payment term to wait until the market stabilizes or using other assets of the enterprise such as real estate products to pay principal and interest of bonds of bondholders.

Impact of Decree No. 08

With Decree 08, real estate businesses that issue corporate bonds will be able to negotiate with bondholders to resolve the current predicament.

However, the Decree only provides for negotiation and agreement. That means that bond investors may disagree with the plan of the business and accordingly, the business will still have to pay the bond principal and interest due to the bondholders.

The actual impact of Decree 08 will still need to be considered in the near future, but in general, the promulgation of Decree 08 has created several possible avenues to save the real estate market in Vietnam through rescuing the real estate businesses.

However, are bonds really a major bottleneck of the real estate market to be resolved through Decree 08?

If we look at the whole real estate market, the big bottleneck of the market does not come from the bond market but in the gap between the supply and demand of real estate products today.

At the end of 2022, the Vietnam Real Estate Association reported that Vietnam’s real estate inventory turnover is at 1500 days. That means it is expected that it will take nearly 5 years for Vietnam to be able to process and sell all existing real estate products on the market, not counting products that are still on paper or incomplete.

Real estate businesses, in order to meet the demand of the wave of speculation in real estate business in Vietnam, have continuously created real estate products in the high, super high segment for the super rich or mainly real estate speculators.

Emerging since 2016, the wave of real estate speculation has caused serious damage to the real estate market. Real estate speculators will not care about the price of real estate products, whether low, medium or high. Instead, they are only interested in buying real estate before the wave of speculation peaks, profiting from the transfer price difference before the real estate bubble burst and the land fever is contained.

It is because of such constant price push that the actual price of real estate in Vietnam today has been inflated too high, not at all close to the market land price according to the regulations of the government and the regulatory agencies that issue the real estate prices at the provincial level.

With the current market, even the super-rich who can afford to buy high and super-high real estate will not spend money to buy real estate because it is not reasonable. Low- and middle-income people will not buy because there are basically no real estate products in the low and medium segments anymore, but only high and super high-end products.

With the price of such high-end real estate products, even if ordinary people want to buy or borrow money from a bank, they will not have enough money to pay their debts and in essence, they do not have the need to own such expensive products.

The law of supply and demand in the real estate market is seriously unbalanced

The fact that people from all walks of life no longer need to buy real estate has created a particularly serious bottleneck in the real estate market, with supply exceeding demand.

While real estate projects have always been implemented by real estate businesses mainly thanks to capital from corporate bonds, real estate products, even though they have been completed, have no buyers, becoming inventory property.

The biggest group of loss here besides normal people who can’t own real estate in all segments is real estate speculators who are stuck at the peak of the wave of speculation, ultimately buying real estate with the hope of speculating but has become a “self-made self-harm” victim of the wave of speculation.

As mentioned above, most real estate speculators do not care about the price or whether they have the financial ability to surf because the source of money they use to speculate on real estate is mostly loans from banks or other lending financial institutions.

In this situation, speculators were forced to liquidate real estate at low prices because they could not bear the pressure from the interest payable. If speculators buy real estate with their own money, they will have more options than to cut their losses since they don’t bear the risk of foreclosure. However, this is very rare in the speculative real estate market.

Real estate investors who buy real estate with cash usually fall into two categories: real estate buyers for the purpose of living and real estate buyers for long-term value investments different from speculation.

Genuine real estate investors will buy real estate with low value and wait for high time to sell, similar to the savings plan of Vietnamese people in the past few decades, equivalent to hoarding gold and foreign exchange.

As for real estate buyers for the purpose of living, they can also get loans from banks and financial institutions, but these cases will usually not have big fluctuations, buyers can afford to borrow and repay according to the plan, independent from the real estate market because they do not depend on the fluctuations of price of the market.

However, the current real estate market has been pushed too high by the wave of speculation, leading to the fact that even with interventions by the Government such as the credit tightening in 2022 or the issuance of Decrees such as Decree No. 08, it is still difficult to stabilize the real estate market at the moment.

Decree 08 will solve some difficulties, provide some solutions and directions so that real estate businesses in particular and businesses in general can restore the bond capital market which is suffering from heavy ‘injury’.

However, in essence, the difficulties of the real estate market need to be solved in a deeper direction, from the business policies of the current Vietnamese real estate enterprises.

In addition to the factor of the wave of speculation that pushes real estate prices up, the fact that those real estate products are inherently in the high or super high price segment are intentionally created and built by real estate businesses, suitable for the wave of speculation and the need of the rich and super rich.

The types of real estate resort, condotel, … are not created for the purpose of low-income people with living needs, but are created mainly to push real estate prices, speculation.

Accordingly, real estate businesses need to change their business plans, create real estate products that are suitable for the current market needs of low- and middle-income citizens.

In addition to meeting the law of supply and demand of the market, the provision of real estate products to meet the social security needs of the people is also in line with the Government’s policies and thereby, will be supported by the State of Vietnam through tax incentives, commendation, etc.

With the current strict management of the Government of Vietnam, Vietnam’s real estate market will no longer be a business opportunity to earn high profits in a short time for real estate businesses and speculators. However, changing business policies cannot be imposed by the State, but real estate businesses need to be self-aware and change themselves in accordance with market needs.

ASL LAW is the top tier Real Estate law firm in Vietnam. If you need any advice, please contact us for further information or collaboration.


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