Is Vietnam headed for a property market crisis ?

There are many factors behind Vietnam’s red-hot property market, with loose monetary policy playing a central role. However, the government is reluctant to tighten it due to both political and economic reasons.

Over the past two years, Vietnam’s major cities have seen a booming housing market. In the second quarter this year, Hanoi’s apartment prices rose 33 per cent year-on-year, averaging US$3,000 per square metre. A similar trend can also be observed in Ho Chi Minh City, where, according to a Cushman & Wakefield report, the first quarter of 2025 saw the average primary price of new condo projects hit US$4,691 per square metre, a 47 per cent year-on-year increase.

The persistent rise in property prices has sparked widespread concern, particularly among the youth. The causes of the boom are multifaceted and need to be addressed at the root. 

It is estimated that an average individual in Hanoi would need to save over 20 years of income, without expenses, to afford a mid-sized apartment. According to Numbeo’s Property Prices Index, as of mid-2025, Vietnam ranks fifth among 103 surveyed countries for the least affordable housing markets. This poses a significant challenge for the government, as soaring housing costs could discourage young people from marrying or having children, worsening the country’s declining fertility rate. Moreover, growing youth frustration may fuel discontent, risking the very social and political stability the government seeks to maintain. 

At a 22 September meeting on the real estate market, Prime Minister Pham Minh Chinh expressed frustration with his cabinet, angrily questioning, “So many people need houses, but with prices so high, who can afford them? If a house costs over 70 million or 100 million dongs per square meter, who has the money?” He then urged ministers to investigate why prices “continue to rise and remain high”. The video of Chinh’s outburst quickly went viral on social media, sparking widespread debates about the causes of the surging property prices. 

The surging housing market cannot be attributed to a single cause. Rather, as various experts and media reports have pointed out, it is the result of a combination of factors. These include a short supply due to Covid-19 disruptions, legal and administrative delays, rising construction costs, and an expansionary monetary policy that fuels demand for housing and encourages property speculation. In addition, there is a lack of efficient tax regimes to counter speculation and a scarcity of affordable housing due to developers’ focus on expensive high-end projects. Finally, the adoption of a new market-based land pricing mechanism in the 2024 Land Law tends to inflate land costs for developers. This has caused them to set high primary prices for new property projects. 

For now, both political and economic dynamics suggest that Vietnam’s property market will remain hot for some time, even as the risk of a property market crisis looms larger.

Some experts have singled out the government’s expansionary monetary policy, which includes low interest rates and a large money supply, as the primary cause of the asset bubble. At local banks, clients can currently secure housing loans with a 3-year fixed interest rate of as low as 6.9 per cent a year (previously, these rates ranged from 10 to 13 per cent). Homebuyers under 35 are entitled to even lower rates. While these rates may be considered high in some other countries, they are attractive in Vietnam. As VPBank CEO Nguyen Duc Vinh noted, “In 26 years of banking, I’ve never seen interest rates this low.” 

At the same time, the increased money supply has resulted in a significant influx of money into the real estate market, undoubtedly playing a crucial role in driving up property prices. By 31 July, for example, real estate credit in Vietnam reached approximately VND4.1 quadrillion (US$155.3 billion), accounting for 23.68 per cent of the total outstanding loans in the entire banking system. This reflects a 17 per cent increase over seven months, nearly double the economy’s overall credit growth of 9.64 per cent. Within this, loans for developers totalled approximately VND1.79 quadrillion (US$67.8 billion), up 23 per cent year-on-year. Meanwhile, consumer loans for real estate purposes, such as home purchases, repairs, and land acquisition, rose by 12.4 per cent, reaching over VND2.28 quadrillion (US$86.4 billion). 

To tackle the issue, the government will need to address all the root causes. At the 22 September meeting, Prime Minister Chinh directed officials to boost housing supply, particularly in the affordable segment. Previous efforts had focused on streamlining legal and administrative processes to help developers cut costs and increase supply. Discussions on tax policies to curb housing speculation are ongoing. Additionally, there have been plans to revise the 2024 Land Law to enhance state control over land prices. 

However, when it comes to monetary policy, Vietnamese leaders are now facing a dilemma. Since assuming power in August 2024, General Secretary To Lam has pushed a pro-growth agenda, targeting Vietnam’s transformation into a high-income economy by 2045, with at least 8 per cent GDP growth in 2025 and double-digit growth thereafter. Expansionary monetary policy and major public infrastructure investments are key to achieving this, given export and consumption constraints.

Tightening monetary policy therefore risks undermining growth. This is politically inconvenient, especially with the Communist Party of Vietnam’s (CPV) 14th National Congress nearing, where strong economic performance bolsters the Party leadership’s legitimacy and strengthens officials’ prospects for promotion. Moreover, with major developers like Vingroup and Sun Group currently developing numerous large-scale real estate projects across the country, abruptly curbing credit could crash the market, increase bad debts, and destabilise the economy. This is a scenario leaders aim to avoid at all costs, especially given the lessons they have learned from China’s property market crisis.

Against this backdrop, Vietnamese leaders are unlikely to rush into tightening monetary policy anytime soon. Any adjustments may come only after the CPV’s 14th congress early next year, and they are expected to be implemented gradually. Moreover, addressing the other root causes of the property bubble will take time. For now, both political and economic dynamics suggest that Vietnam’s property market will remain hot for some time, even as the risk of a property market crisis looms larger. 

By Le Hong Hiep – Yusof Ishak Institute / Fulcrum.sg – October 3, 2025