Vietnam property market splits as high mortgage rates squeeze homebuyers

Mortgage rates of 12-14% are emerging as the biggest hurdle for Vietnamese homebuyers, particularly first-time buyers, as the country's property market enters a period of consolidation and growing segmentation.

Apartment prices in major cities such as Hanoi and Ho Chi Minh City remained elevated in the first half of the year, while many owner-occupiers continued to rely on bank loans covering 50-70% of a property's value. With mortgage rates hovering around 12-14%, purchasing a home has become increasingly difficult.

Minh, a 32-year-old office worker in Ho Chi Minh City, and his wife saved nearly 1 billion ($38,000) over almost eight years with the goal of buying a mid-range apartment worth about VND3.5 billion ($132,990).

However, financing the remaining VND2.5 billion, or roughly 70% of the purchase price, proved challenging.

Even with a promotional first-year mortgage rate of around 10-11%, monthly principal and interest payments would consume almost all of the couple's combined monthly income of nearly VND35 million ($1,330). Once the loan reverted to a floating rate of 12-14% from the second year onward, repayments would rise even further.

"With VND1 billion ($38,000) in hand, we thought we were close to owning a home. But with borrowing costs this high, continuing to rent makes more financial sense because monthly repayments would overwhelm our household budget," Minh said, adding that he had postponed plans to buy.

Genuine housing demand constrained by affordability

Nguyen Hoang, a real estate expert, said the market was undergoing a period of restructuring driven by genuine demand, although that demand extended beyond first-time homebuyers.

According to Hoang, end-user demand also includes buyers seeking rental income, long-term asset accumulation, homes for family members or second homes for leisure purposes. What distinguishes these buyers from speculators is that they purchase property for long-term use or wealth preservation rather than short-term trading.

Still, he said affordability remains the decisive factor.

"Having genuine demand does not necessarily mean buyers have sufficient financial capacity," Hoang said. "For apartments priced at VND3-4 billion ($152,000), buyers typically need loans covering 50-70% of the purchase price. At mortgage rates of 12-14%, many are no longer willing to use financial leverage despite having real housing needs."

He said the current market paradox is that rising borrowing costs are affecting not only speculative investors but also owner-occupiers with limited financial resources. While wealthier buyers can afford to wait for better market conditions or benefit from developers' financing incentives, many middle-income households are being priced out.

The ongoing market shakeout is gradually removing highly leveraged investors and speculative buyers driven by fear of missing out, Hoang said. However, if borrowing costs remain elevated, owner-occupiers will continue to bear much of the pressure.

High borrowing costs expected to weigh on recovery

The outlook broadly aligns with forecasts from Dat Xanh Services' Institute for Economic, Financial and Real Estate Research (DXS-FERI), which expects mortgage rates to remain at 12-14% during the second half of 2026, continuing to constrain market liquidity.

Although Vietnam's property market has recovered from its weakest period following the 2023 downturn and rebounded during 2024-2025, the market has become increasingly polarized across both property segments and buyer groups in 2026.

With global economic uncertainty persisting and monetary policy expected to remain cautious, interest rates are unlikely to fall rapidly, forcing buyers to become more selective.

DXS-FERI forecasts that around 33,000 new homes will enter the market in the second half of the year, lifting total primary supply above 100,000 units. However, demand is expected to recover only gradually, with absorption rates projected at 20-30%, driven mainly by owner-occupiers and long-term investors.

Market-based pricing seen as key

Hoang said property prices are fundamentally determined by supply and demand and cannot be effectively adjusted through administrative measures.

Instead, he said the government's role should focus on improving market transparency through land-use planning, credit policy, taxation and land development.

Affordable housing, in particular, requires coordinated policies covering land availability, investment procedures and long-term financing for buyers.

Hoang said Vietnam's VND30 trillion ($1.14 billion) housing credit package launched in 2013-2014 remains a useful policy reference, as it helped revive market liquidity while supporting the development of affordable housing.

"The market needs a long-term, stable program to expand housing supply that matches the purchasing power of most households," he said.

Higher rates likely to reshape investment behavior

Economist Dinh The Hien said mortgage rates of 12-14% reflect the consequences of the previous period of rapid credit expansion into the real estate sector.

Vietnam has experienced similar cycles before. Mortgage rates climbed above 20% in 2012, freezing the property market, while tighter credit conditions introduced in late 2022 contributed to the market downturn in 2023.

Although the current increase is less severe, Hien said its impact is likely to extend through 2026-2028 by reducing opportunities for short-term investment and making speculative trading less attractive.

He said tighter controls on real estate lending remain appropriate as the government prioritizes credit for manufacturing, exports and public investment. Mortgage rates are expected to stay around 12% for much of 2026 before easing toward 10% in 2027 if macroeconomic conditions improve.

DXS-FERI outlined three scenarios for the remainder of the year. Under its baseline scenario, mortgage rates of 11-13% would support a 20-30% increase in new supply, broadly stable or slightly higher prices and an absorption rate of 25-40%.

If mortgage rates rise to 13-15%, market absorption could fall below 20%. Conversely, if rates decline to 9-11%, absorption could improve to 40-50%.

The institute said investment capital is expected to concentrate on projects with clear legal status, genuine residential demand and sustainable income potential, including mid-range apartments, social housing and developments benefiting from new infrastructure.

Overall, Vietnam's property market is entering a period of significant consolidation, with capital increasingly shifting away from speculative price appreciation toward long-term utility and sustainable value. Analysts said long-term policies aimed at expanding affordable housing supply and improving access to mortgage finance for owner-occupiers will be essential to support the market's next phase of development.