Impact of rising interest rates on real estate, equities, and gold

Vietnam’s economy has spent more than two decades alternating between periods of strong growth and phases of sharp adjustment when macro conditions become unstable. In that cycle, monetary policy—reflected in movements in interest rates—acts as a “valve” that influences capital flows into different asset channels.

Financial theory links asset values to the present value of expected future cash flows discounted at a risk-free rate. When the State Bank of Vietnam (SBV) raises the operating interest rate or uses other tools to lift rates in the economy, the market’s risk-free rate increases, pushing up the discount rate and reducing the present value of assets.

In Vietnam, sharp rate hikes have often coincided with macro challenges that affect cash flows and the outlook for real estate and equities. By contrast, gold has shown resilience across different rate environments, whether prices previously moved sideways or rose.

2007–2008: WTO-driven inflows, inflation spike, and tightening

After Vietnam officially joined the World Trade Organization (WTO) on January 11, 2007, foreign capital inflows surged. Combined with earlier credit loosening, this contributed to a broad asset surge.

The outcome was an inflation spike to nearly 23% in 2008. Alongside the global financial crisis, inflation worsened, prompting SBV to raise policy rates multiple times to curb inflation and defend the domestic currency. In January 2008, the refinancing rate was 7.5% per year and the rediscount rate was 6% per year; by June 2008, these were raised to 15% and 13% respectively. Lending rates at the time even exceeded 21% per year.

This tightening environment proved painful for real estate and stock markets. The stock market, still relatively young, saw panic selling and the VN-Index fell nearly 66% in a single year. Real estate cooled sharply as liquidity tightened, with both homebuyers and investors unable to absorb rapid rate increases over a short period.

Gold, however, remained resilient during 2008, with gold prices staying stable despite broader economic volatility.

2009–2011: Easing attempts, renewed instability, and exchange-rate pressure

After the 2008 tightening, easing to stimulate demand occurred in 2009. However, macro instability returned as inflation rose again, banks faced bad debts, and exchange-rate pressure increased.

On February 11, 2011, SBV devalued the dong against the dollar. In one day, the VND/USD rate rose from 18,932 to 20,693.

Inflation in 2010 was 11.8%, increasing to 18.6% in 2011. As a result, the 2011–2012 period saw a new round of monetary tightening to stabilize the exchange rate and restructure the banking system. From the latter half of 2010 to the end of 2011, SBV raised the discount rate to 13% from 7% and the refinancing rate to 15% from 9%. Banking liquidity became extremely tight, contributing to a run on higher deposit rates beyond the regulatory cap.

Real estate inventory value rose: industry sources indicate inventory value in 2012 increased by 85% compared with 2011, and project prices began to fall.

Equities also weakened. After recovering in 2009 due to credit loosening, the market started to weaken from late 2010, ending the year down 2% from the start and down 12% from the peak. In 2011, it collapsed by 28%.

Gold entered a rally during 2010–2012. High domestic inflation, a devalued dong, limited investment channels, and rising global gold prices pushed gold prices (SJC) to record highs from 2010 through 2012.

2022: Global tightening, domestic liquidity stress, and asset divergence

In the most recent tightening cycle in 2022, deposit rates across all tenors rose as banks faced liquidity pressure, even though the policy rate did not adjust until September. SBV also faced challenges in maintaining a low-rate environment as the Fed and other global central banks launched the most aggressive tightening cycle in decades to combat runaway inflation after the COVID-19 pandemic.

By the end of the year, real estate liquidity began to freeze following bond-market shocks and the Van Thinh Phat–SCB case. Housing prices, however, showed dispersion: speculative land plots and non-urban land in provinces fell sharply, while real estate products tied to real housing demand—such as central-city homes and apartments—held prices despite weak transactions.

The stock market weakened quickly, especially in real estate, as major companies struggled after fundraising channels were abruptly restricted. The VN-Index fell 33% in 2022.

Gold prices fluctuated but generally remained relatively stable and continued to function as a store of value when other asset classes wobbled. Gold rose from around 60–61 million VND per tael to a peak of 74.4 million VND in March 2022, before adjusting to around 66–67 million VND by year-end.