THE INVENTORY TRAP AND SUPPLY-DEMAND MISMATCH IN THE RESTRUCTURING OF VIETNAM’S REAL ESTATE SUPPLY

Supply Is Recovering, but Absorption Remains an Open Question

After a period in which the market was constrained by legal and investment-procedure obstacles, the supply of housing is showing clear signs of improvement.

According to data from the Ministry of Construction, approximately 113 new commercial housing projects, equivalent to around 103,205 housing units, were licensed in Q2 2026. This represented an increase of 194.8% from Q1 and more than three times the figure recorded in the same period of 2025. The figures indicate that the flow of new supply is gradually being unlocked.

However, on the other side of the market, successful transactions in Q2 stood at approximately 100,005, down to 71.5% of the Q1 level and 63.7% of the figure recorded in Q2 2025. Real estate inventory across 25 of the 34 localities covered by the report stood at approximately 39,284 units, representing a slight increase from the previous quarter.

These figures point to a notable paradox: supply is returning faster than the market’s ability to absorb it.

The issue, therefore, is no longer simply whether there are projects available for sale, but whether those products actually match the needs of buyers.

Inventory and Weak Liquidity Are Only the Surface of the Problem

Inventory is often viewed as a sign of weak purchasing power. However, in the current market, the underlying issue also lies in the mismatch between supply and actual demand.

In Q2 2026, reported inventory consisted of approximately 12,823 apartments, 15,313 individual houses, and 11,148 land plots. The Ministry of Construction assessed inventory as showing a slight upward trend.

Importantly, inventory is not evenly distributed across market segments or geographical areas. In some locations, buyers may struggle to find housing that meets their needs, while in other areas, products that have already been completed or launched may still struggle to attract buyers.

This is precisely what a supply-demand mismatch looks like: a market can simultaneously experience a shortage of suitable housing and an oversupply of products that are difficult to absorb.

Social Housing: It Is Not Just About Having Enough Supply, but Having the Right Supply

Social housing is perhaps the clearest example of this issue.

As of Q2 2026, Vietnam had approximately 875 social housing projects, with a planned total of nearly 771,971 units. Of these, 289 projects, comprising around 197,319 units, had been completed, while 270 projects, with approximately 269,409 units, were under construction.

These figures show that the development of social housing supply is being accelerated. However, actual implementation at the local level reveals significant differences in absorption capacity.

At a project in Pho Yen, Thai Nguyen, a company representative said that the project, with approximately 1,000 units, had sold only 14 units, despite estimated registration demand reaching tens of thousands of people. This is a specific case and cannot be considered representative of the entire market. Nevertheless, it illustrates that the challenge facing social housing is not simply increasing supply, but ensuring that products reach the right target groups and remain accessible to people who genuinely need them.

For social housing, buyers consider more than just price. They also have to weigh commuting distances, access to schools, hospitals, transportation, and essential services.

A project may offer an affordable price, but if it is located too far from employment centers or lacks adequate transport connections, it may still face weak absorption and liquidity risks.

Therefore, social housing planning should not stop at the question of “Where is land available for development?” It should also take into account how people actually live and work, allowing for solutions that are better aligned with their real needs.

High Financing Costs Make the Absorption of New Supply Even More Critical

The supply-demand mismatch becomes even more significant when financing costs remain a major pressure on real estate developers.

At a real estate market conference in September 2026, a business representative said that commercial lending rates faced by real estate companies could reach around 12–14%, significantly higher than in previous periods.

Under these conditions, a large-scale project with slow sales creates a double burden: capital remains tied up in unsold inventory while financing costs continue to accrue.

This is forcing developers to rethink how they assess projects. The focus is no longer simply on holding large land banks or developing large-scale projects. Instead, developers need to identify their target customers more precisely, determine what price levels the market can absorb, and assess realistic sales velocity.

From “More Supply” to “The Right Supply”

A healthy real estate market needs not only an increase in supply, but also supply that is aligned with purchasing power and genuine housing demand.

This is also why the gap between social housing and commercial housing has attracted increasing attention. Social housing offers more affordable prices, but its eligibility requirements and available amenities may not meet every household’s needs. Meanwhile, many commercial housing products remain beyond the financial reach of a large proportion of potential buyers.

Proposals for more affordable commercial housing have been put forward to fill the gap between these two segments. However, this remains a policy proposal rather than a legally established housing category or an independent market segment.

At the same time, residency requirements for accessing social housing are also being debated. Some stakeholders, including the Ho Chi Minh City Real Estate Association (HoREA), have proposed considering the restoration of residency requirements to limit competition for local housing supply from applicants living in other areas. This is a policy recommendation and is not currently a mandatory legal requirement.

Restructuring Supply: From Land Area to Use Value

In the next phase of the market, real estate development may need to shift from the mindset of “developing because land is available” to “developing because there is demand.”

For commercial housing, this means finding the right balance between selling prices, location, amenities, and affordability. For social housing, the challenge is even greater: products must not only be priced within the reach of lower-income households, but must also be supported by adequate transport infrastructure and essential public services—two critical conditions for ensuring long-term usability and market absorption.

An increase in supply is a necessary condition for market recovery. However, if supply grows faster than purchasing power, or if projects are developed in locations that do not correspond to actual demand, the market could shift from a shortage of supply to localized oversupply, creating further inventory pressure and higher financing costs.

Therefore, the challenge for the real estate market in the next phase is not simply to remove legal obstacles and bring more projects to market. More importantly, it is to restructure supply around actual market demand.

A successful project should not be measured solely by the number of units brought to market, but also by its ability to be absorbed by buyers, put into actual use, and generate real value for the people who purchase it.