Residential Real Estate Sector | Initiation Report, In a New Cycle

OVERVIEW

Residential real estate remains a key driver of Vietnam’s economic growth, with strong spillover effects on banking, construction, and materials. Its recovery also signals improving consumer confidence, given the long-term financial commitment of mortgages. After the freeze of 2022–2023 driven by credit tightening and a loss of trust, the sector began to stabilize in 2024–2025, supported by important legal reforms.

SECTOR OUTLOOK

Vietnam’s residential market is underpinned by favorable demographics, accelerating urbanization, major infrastructure investment, and regulatory reforms that are gradually unlocking stalled projects. Demand remains concentrated in the mid-end segment (VND 3–5 bn), with suburban and industrial-linked corridors capturing the strongest absorption thanks to better affordability and connectivity. Developers with exposure to these segments and solid balance sheets are best positioned to outperform amid ongoing credit tightening and policy uncertainty.

1. Strong Demand from Demographics Tailwinds:

Vietnam’s demographics and income trajectory provide a long, visible runway for housing demand. Urbanization has risen from 33% in 2013 to over 40% in 2023 (adding ~1 million urban residents annually) and is projected to reach 50% by 2040. This structural shift, driven by labor migration into fast-industrializing provinces, continues to create substantial untapped demand for housing.

2. Legal & Regulatory Clarity Unlocking Projects

Regulatory reforms and more transparent land-use frameworks are poised to become major tailwinds for the residential sector in Vietnam over the next development cycle. These reforms specifically address longstanding bottlenecks, stalled licensing, ambiguous land-valuation mechanisms and elevated land costs which have historically affected development timelines and inflated costs for residential developers.

3. Supply increases unevenly leading to oversupply in select segments

Throughout 2025, residential markets in Hanoi and HCMC remain characterized by tight supply and resilient demand, sustaining upward price pressure. As legal reforms take effect, project launches are expected to accelerate from H2 2025, especially in peripheral districts and Tier-2/3 cities. HCMC is already showing increased high-end activity and growing supply from large suburban townships.

However, risks of oversupply may emerge in 2025–2027, particularly in high-end products and in Tier-2/3 cities where growth may outpace real demand. These areas could face slower absorption, discounting, or rising inventory levels.

4. Core housing demand remained concentrated in mid-end, affordable, and suburban segments

Housing in Hanoi and HCMC has become increasingly unaffordable, while real demand is concentrated in the mid-end segment (VND 3–5 bn/unit). As a result, suburban and industrial-linked corridors are emerging as the primary demand centers. Projects offering smaller units, flexible payment terms, good connectivity, and practical amenities, rather than premium positioning, are best placed to attract genuine end-user demand.

Developers focusing on well-connected, affordable, community-oriented projects in fast-growing provinces are likely to benefit most from this structural shift, achieving stronger absorption with lower sales risk given the dominance of end-user buyers in the mid-end segment.

5. Financing and Capital Flows Normalize but Selective

Credit conditions are improving, with SBV reporting 13.37% credit growth in 9M2025 and real-estate lending up 17% YoY to VND 4,100tn. As liquidity constraints that weighed on the sector in recent years gradually unwind, allowing developers to access/secure funding easier in 2025. However, the upside is conditional, and the risks are meaningful. If interest rates rise, bank credit tightens or regulatory policies become more restrictive, especially in response to exchange rate and inflation risks, then demand could quickly soften and affect absorption rate.

6. Emergence of Rent Behaviour and Opportunity for Rental-Driven Models

Young homebuyers are increasingly choosing to rent rather than buy as rental yields (2–4%) lag far behind mortgage costs (8–10%) and stretched valuations, USD 3,000/m² against modest incomes, undermine both affordability and the appeal of property as an investment.

7. Valuation Getting Expensive; Divergence of Performance Foreseeable

The sector is trading at a weighted average TTM P/B of around 3.0x, but valuation dispersion is wide across companies. VIC-related entities continue to have premium multiples given scale, execution reliability, while many mid-tier developers are still priced at elevated levels relative to their execution risks and financial health.

RECOMMENDATIONS

We recommend to overweight real estate in 2026, backed by broad-based recovery, policy-driven momentum, and valuation normalization.

Our top recommendations for 2025–2026 are KDH (2026 TP: VND 45,900/share, +31.3%), NLG (2026 TP: VND 43,750/share, +25.2%) and TCH (2025 TP: VND 24,150/share, +18.1%). These names stand out for their robust project pipelines, consistent execution, and structural advantages in funding and balance-sheet strength.

We also highlight VHM, supported by one of the largest land banks in the sector, with a long-track record of flawless delivery, and a dominant brand. However, with the share price now trading above our assessment of fair value, we advise investors to approach selectivity.