VIETNAM CONSTRUCTION MARKET – CURRENT STATUS AND DEVELOPMENT TRENDS
Vietnam’s construction market is affected by many factors leading to strong fluctuations in construction material prices and project implementation prices. Some of the factors are stable and stable while others are volatile. The construction market is expected to continue to increase in near future.
Overview of the construction materials market
Starting from the war between Russia and Ukraine from the beginning of 2022, the war has made the prices of raw materials soar, especially gasoline, oil and metals. This is also the reason for the increase in steel prices and freight prices in the Vietnamese market. Next is the recovery of the Chinese construction market after Chinese government lifted up the embargoes due to Covid 19. This recovery makes steel prices in neighboring markets also soar. In Vietnam, iron and steel exports in the first months of 2023 have doubled. Export value also increased more than 63.5% over the same period of last year. With high export volume and value amount, domestic steel prices increased again after showing signs of cooling down in the last months of 2022.
From the beginning of 2023, the government is asking provinces’ authorities to review, tighten and put into control all mining activities of minerals for construction materials in order to minimize impacts on the environment and avoid wasting mineral resources. The tightening of exploitation while massively implementing component projects of the North-South Expressway makes construction materials on the market scarce, especially sand and stones. Sand and stones are also the main raw materials for the production of the other construction materials such as mortar, concrete, bricks, piles, etc., so the price of these materials also increases along with the increasing momentum of sand and stones.
Overview of the Construction market.
From mid-2022, the government required banks to limit lending, especially loans for purchase, sale or other transactions related to real estates, leading to high loan interest rates and difficult loan approvals. Along with the fact that most of the big real estate corporations in Vietnam are being probed by the government to check for mistakes in management and administrative procedures regarding loan’s business. Followed by a series of large projects that are stalled, suspended due to lack of budget and waiting for additional legal fixing procedures. The domestic construction market has been frozen because more than 75% of the workload in construction comes from the construction of apartments, offices and residential buildings.
With the above situation, domestic construction companies have been really struggling and falling down into competing fiercely to find a job. Even they are willing to accept reducing business profits to survive.
Development tendencies of the construction market
The cost of implementing a project includes two kinds of costs, one is for construction materials and the other for construction implementation. Currently, the cost of construction materials is increasing while the cost of construction implementation is decreasing. Therefore, the project implementation cost at the present time will only increase slightly compared to last year. However, we can see that the factors affecting the price of construction materials are more stable and sustainable than the factors affecting the cost of construction implementation. Thus, in the coming time, once the bank interest rate cools down along with the fact that big real estate corporations get through legal barriers and troubles, lots of projects would restart at the same time and that may drag the prices of construction materials and construction costs go higher and higher.