How to avoid boom and bust cycle in domestic real estate market in 2025

An inverted pyramid market structure

An issue that has gone unresolved in the real estate market for years is the imbalance in housing supply. While demand for housing remains high, affordable housing options are scarce.

“Since 2021, the segment of homes under VND3 billion each has completely disappeared from the Ho Chi Minh City market. Meanwhile, social housing projects are currently able to amount to only about 12,000 units. The market is in an inverted pyramid state, leading to instability and unsustainable growth,” remarks Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association.

The Vietnam Association of Real Estate Brokers reports that last year saw new condominium supply primarily concentrated in the high-end and luxury segments priced from VND50 million/m² and above, accounting for 65% of the market. In Q4 of 2024 alone, 47% of newly launched condominiums belonged to the high-end segment.

Throughout 2024, nearly 10,000 condominium units were sold at prices exceeding VND80 million/m², marking a more than threefold increase compared to figures recorded in 2023. The northern region contributed 60% of new housing supply, while the southern and central regions made up only 29% and 11%, respectively.

“In reality, with limited and expensive land in major cities, new housing supply is increasingly concentrated in large-scale urban projects developed by major corporations. This means that housing prices will remain high, making it difficult to meet the needs of middle- and low-income residents,” says Nguyen Van Dinh, vice chairman of the Vietnam Real Estate Association.

He suggests that in order to ensure stable and sustainable real estate growth, the Government should move to introduce policies that aim to encourage new supply, particularly in the affordable housing and social housing segments.

For real estate projects facing legal or financial obstacles, he says, authorities should categorise them based on the specific issues and duly assign responsible agencies for resolution. In addition, projects that have been put on hold should be strictly reviewed and, if necessary, revoked, proposes Dinh.

Tools for limiting speculation

Beyond structural imbalances, market fluctuations have also been driven by price manipulation tactics employed by speculators and brokers. In line with this, there has been a widespread practice of artificially inflating property prices, along with bidding wars that result in speculative withdrawals.

“These tactics are often used by speculators or real estate brokers to corner the market for profit,” notes an executive from a real estate firm.

However, rising housing prices are also linked to increased land and construction costs, as well as limited supply. Economic fluctuations in stocks, bonds, and gold have further influenced investor sentiment, prompting them to shift capital into real estate as a safe-haven asset.

Some experts argue that taxing second and subsequent properties could be an effective measure to curb speculation. Indeed, the Government should seek to leverage tax policies as part of efforts to regulate the market, particularly by imposing property taxes.

Prof. Dang Hung Vo, former Deputy Minister of Natural Resources and Environment, supports a time-based property tax, a model successfully implemented in many countries.

“Taxing properties based on ownership duration will help cool down the real estate market, limit speculation, and prevent housing bubbles. A higher tax rate on short-term property ownership will reduce speculative buying and selling while increasing liquidity for genuine homebuyers. This, in turn, will help stabilize the real estate market and eliminate artificial price inflation,” explains Prof. Vo.