Real estate lending rates have surged rapidly in the early months of the year, placing significant pressure on both developers and homebuyers. This phase is considered a necessary adjustment for restructuring the market and its products toward greater transparency and sustainability.

According to a report by Savills Vietnam, mortgage interest rates at several banks have recently increased sharply, at times reaching 15–16% per annum. This has raised the cost of capital and directly impacted borrowers’ repayment capacity as well as investment decisions.

These developments have quickly been reflected in the market, with liquidity declining and transaction activities slowing down in Q1/2026. After the Lunar New Year, buyers have become more cautious amid ongoing macroeconomic uncertainties, including long-term urban planning directions for the capital and interest rate fluctuations. This has prolonged decision-making timelines and reduced overall market momentum.

Savills Vietnam reported that in Q1/2026, new apartment supply reached approximately 6,108 units, declining both quarter-on-quarter and year-on-year. Transaction volume showed a similar trend, with the mid-end segment (Grade B) accounting for the majority, representing around 79% of total units sold.

From a corporate perspective, high interest rates combined with tightened credit conditions are increasing financial costs and limiting access to capital, particularly for projects with low feasibility. Meanwhile, investors using high financial leverage—especially short-term investors—are facing rising risks as cash flow pressures may force them to cut losses and exit the market.

A “Screening” Phase for Developers

In response to these developments, Ms. Do Thi Thu Hang, Senior Director of Advisory & Research at Savills Hanoi, stated:

“The market is entering a period of strong and deep screening. Access to capital from banks and funds will be more strictly assessed, prioritizing projects with high feasibility and those that meet real market demand.”

“Only companies with strong financial foundations, stable cash flow, and diversified capital mobilization capabilities will have sufficient resources to continue project development and provide appropriate interest rate support solutions for customers. This process will eliminate weaker players while retaining those with strong risk management capabilities and the ability to balance profitability to accompany buyers in the long term,” she added.

Amid tightened cash flows, the divergence between different groups of enterprises has become more pronounced than ever. The “flight to quality” mentality has led buyers to focus on developers with strong financial capacity and solid reputations.

While strong developers leverage mergers and acquisitions (M&A) to expand market share, weaker firms—particularly those over-reliant on financial leverage—are falling into stagnation. For this group, aggressive restructuring or market exit appears inevitable as new capital sources become increasingly scarce.

Opportunities Amid Challenges

Although rising interest rates pose significant challenges, from a positive perspective, this presents an opportunity to shape a more transparent and sustainable market. After the screening phase, homebuyers will have access to a wider range of quality projects developed by reputable developers. The acceleration of infrastructure development also enables easier access to projects in suburban areas at more affordable price points.

Overall, rising lending rates are not merely a short-term challenge but also serve as a rigorous stress test for market participants.

Looking ahead, strong financial capacity, reputable and experienced developers, and flexible management strategies will be key factors determining adaptability and long-term sustainability for real estate enterprises.