This content is an excerpt from Savills Impacts, a global report on real estate trends that will shape the market in 2025. It is curated and supplemented with local insights from Savills Viet Nam.

The newly released Savills Impacts 2025 report highlights a pressing global challenge. The construction industry is being restrained by three major barriers: soaring costs, tightening financial conditions, and a labour shortage. These factors are not only slowing the progress of new developments in mature markets but are increasingly impacting emerging economies, including Viet Nam.

Key Constraints on the Construction Sector

According to Savills Impacts 2025 report’s data, construction costs in the United States, the UK, France, Germany, and Singapore have consistently outpaced consumer price inflation (CPI) from 2020 to 2024. This is the cumulative result of prolonged disruptions, from logistical crises and material price volatility, to increasingly stringent demands for build quality and ESG compliance.

Adding to this pressure are evolving tenant expectations, particularly in the office sector, where demand has shifted toward premium, wellness-oriented workplaces. Consequently, fit-out costs are rising sharply. In the UK, construction accounted for 17% of all insolvencies in 2024, the highest across all sectors, reflecting the immense financial stress weighing on developers.

However, the impact varies across markets. Will Forwood, Managing Director of Savills Projects Asia Pacific, notes: “In many developing economies like Malaysia, Japan, and India, costs are not yet the dominant constraint, but pressure is mounting. Labour costs, in particular, are rising above inflation, especially for high-tech projects or in rapidly urbanising areas.”

A notable additional factor is the shift in the supply of construction materials—particularly sand. To protect the environment and stabilize riparian ecosystems, several provinces in Vietnam and countries across the region have tightened control over natural sand mining. Restrictions on extraction in sensitive areas, combined with rising transportation costs, have contributed to an upward trend in sand prices—impacting overall construction costs, especially for large-scale infrastructure projects or those requiring complex foundations. While not the primary cause of the disconnect between property prices and input costs, this remains a contributing element in the evolving cost structure.

Vietnam remains resilient, but not immune

Viet Nam is one of the region’s fastest-growing economies and is not exempt. As of 2024, the domestic construction materials market has experienced significant price volatility, particularly for cement, sand, and aggregates. Although a range of factors such as location, legal framework, and brand perception drive pricing, increasing development costs—from construction inputs to amenity upgrades—have contributed to this upward trajectory.

According to Savills Viet Nam, Ha Noi’s primary condo prices reached an average of VND 79 million per square meter in Q1 2025, a 32% increase year-on-year(YoY). Meanwhile, new supply in HCMC remains extremely limited, with only 800 units launched in the quarter, primarily in the mid- to high-end segments. Affordable housing remains scarce, indicating how rising costs are directly reshaping product structures.

The landed residential segment also recorded significant price growth. In Ha Noi, villa prices increased by an average of 29% per year over the past five years, while townhouses saw 22% annual growth. These figures are not solely demand-driven but also reflect escalating investment into infrastructure, amenities, and product quality.

Beyond costs, financing has become another critical global constraint. The end of the low-interest era has driven up capital costs, prompting financial institutions to tighten lending conditions by imposing higher equity requirements and stricter transparency standards. In Viet Nam, although interest rates are relatively controlled, credit for real estate remains limited due to prudent monetary policies. This poses challenges for developers trying to launch or revive projects, particularly in major cities where land costs are high and legal processes are protracted.

Labour is emerging as a growing challenge in Viet Nam’s construction sector. The workforce largely comes from rural areas and tends to be seasonal, impacting project timelines during peak periods. In response, some developers are starting to adopt modern construction methods such as BIM and prefabrication, proven to optimise costs and reduce construction timelines in markets like Singapore and India.

In addition to the core pressures of costs, finance, and labour, the global construction sector faces compounding challenges: climate change, energy shortages, and limited land availability. In Viet Nam, HCMC serves as a prime example of a city grappling with rising sea levels, tidal flooding, and heavy rainfall, which significantly drive up infrastructure development costs.

Amid these intersecting challenges, the construction and real estate markets are undergoing deep structural shifts. Yet, this volatility also presents a window of opportunity for developers who can adapt to new trends, innovate operating models, and stay ahead of evolving market demands.

Navigating Uncertainty and Finding Opportunity

Despite mounting headwinds, global construction and real estate markets continue to experience significant supply gaps, particularly in high-quality segments.

In Viet Nam, the real estate market has gone through disruptions, from the pandemic to credit tightening and prolonged legal barriers, resulting in a period of market consolidation with stalled projects and more cautious investor sentiment. In response, Viet Nam has introduced several structural reforms. The rollout of the amended Land Law, Housing Law, and Real Estate Business Law from August 2024 marks a major step toward resolving legal bottlenecks and facilitating long-term capital flow. Alongside this, large-scale public investments are accelerating, from Long Thanh Airport and the North-South Expressway to the Ha Noi and HCMC ring roads, opening new growth corridors for satellite cities.

Across major cities in Europe and Asia, demand for Grade A, ESG-compliant office space remains unmet, offering investment opportunities in asset upgrades and more flexible workplace models. In Viet Nam, the trend of “workcation” buildings is gaining momentum with properties integrating gyms, relaxation areas, wellness spaces, and even parent rooms for postnatal employees. Reflecting this demand, the average office rent in HCMC now stands at VND 833,000 per square meter per month, a 4% YoY increase, signalling that occupiers are increasingly willing to pay more for better experiences.

In an increasingly competitive market, the advantage will favour businesses that invest in asset quality, embed ESG standards, and leverage technology for efficient construction and management. Forward-thinking developers who embrace sustainable design, modern construction methods, and proactive asset enhancement will not only control their costs better but also expand margins by delivering higher-value products to the market.