Industrialization and foreign direct investment (FDI) inflows have made Vietnam a bright spot in Asia. This rise is reflected in the thriving real estate market.
The rise of the middle class
Rapid urbanization and a growing middle class have spurred Vietnam to quickly recover and develop after two years of being affected by the COVID-19 pandemic. As investors look for investment channels after the pandemic, home prices are one thing that attracts them to the real estate market.
Alex Crane, CEO of Knight Frank Vietnam said: “The housing market in Vietnam has never really gone through a cold period. The decreasing supply and shortage of quality products further contribute to investor confidence, although they may have to spend more capital.”
According to the Asian Development Bank (ADB), Vietnam's GDP in 2022 can grow by 6.5%, outperforming neighboring countries in the ASEAN region. Ms. Hang Dang, CEO of CBRE Vietnam said that the average income of households in the country is increasing. "Vietnam's growing wealthy class, especially during the pandemic, shows the potential for developing high-end and ultra-luxury products in the real estate market in the future," said ADB.
Since reopening in March, Vietnam has seen an uptick in high-tech investment commitments, led by toy maker Lego Group's $1 billion plan. in an industrial park in the south. In the first quarter, total registered FDI tripled to US$8.9 billion, of which US$2.7 billion was registered for the real estate sector. Hired by everything from medical equipment to furniture, Vietnam's North to South industrial zones saw occupancy rates increase to 79.3% and 87.3% respectively in the quarter. end of 2021.
The subsequent decline in land bank has reduced the supply of new housing in 2021, of which Ho Chi Minh City has 14,843 units and Hanoi has 19,439 units. The number of new apartments in the country's two largest cities is also only half of the annual new supply from 2015 to 2019 and even lower than in 2020.
“Despite the drop in supply, sales in both cities exceeded new supply. This is a sign of a shortage in supply, not an oversupply in the housing market,” Hang said.
Many multinational corporations enter Vietnam
Multinational corporations continued to expand into Vietnam even as the industrial real estate supply chain was congested in the third quarter of 2021. “Even during the pandemic, we have seen clients yearning for new industrial land for their projects,” said Paul Volodarsky, senior leader of international law firm DFDL. know.
Vietnam has recently formed a series of well-invested industrial parks. For example, award-winning Binh Duong Industrial Park plans to build 230,000 square meters of on-site facilities within five years.
Some are prepared to grow into a dynamic city. Can Tho is a smart city purposefully developed to accommodate industrial investments. In addition to Ho Chi Minh City, Dong Nai province has also become a hot spot for housing development.
Meanwhile, industrial development is concentrated in secondary cities such as Bac Giang, Nam Dinh, Vinh Phuc, Quang Ninh, Binh Thuan, Ba Ria - Vung Tau, Binh Phuoc, Tay Ninh, Tien Giang and Vinh Long.
"What's new about the recent boom is the shift from large-scale development combining industrial and residential areas to meet the needs of large industrial clusters," Crane said.
As Vietnam continues to transition to a market economy, urbanization is accelerating even further. According to the World Bank, urban growth in Vietnam will reach 2.6% from 2015 to 2020, the fastest growth rate in Southeast Asia.
Most of the domestic luxury projects are still geared towards Vietnamese people. Mr. Volodarsky said: “You can see a lot of foreign investors in the development of residential projects. However, Vietnam is relatively unique among the developing markets in Southeast Asia in that you can see residential acquisitions driven by domestic buyers themselves, including the high-end segment. grant".
Vietnamese residents are being introduced to branded apartments, according to CBRE data. Last year, the world's largest Marriott-branded residential complex, also the first in Vietnam, was launched in Ho Chi Minh City.
Real estate prices increase
Knight Frank said that the price of high-end real estate in Ho Chi Minh City is currently at $7,000 to $8,000/m2, while the price in Hanoi is $3,500/m2. The average apartment price across all segments was stable at USD 3,056 m2 in HCMC and USD 1,956/m2 in Hanoi.
“When I came to Vietnam in 2018, you could buy a luxury residence for around $6,000/m2. Now it's not even classified as a luxury anymore," Volodarsky said.
With a high base interest rate, popular products are scarce in Hanoi and Ho Chi Minh City because connecting infrastructure with suburban areas takes a long time to complete, CBRE noted. The city's first metro lines are still under construction while the government plans to develop more than 5,000 kilometers of highways nationwide by 2030.
In retrospect, Vietnam's recent slowdown in construction is not just an indictment of the pandemic. Analysts believe that is the cause of the delay in the issuance of red books, i.e. certificates of land use rights, certificates of house ownership and residential land use rights (pink books).
According to CBRE's estimates, with construction recovering again, housing supply in Vietnam will increase in 2022. Newly launched housing supply is expected to reach 22,000 units in HCMC and 28,000 units. in Hanoi. Sale units can reach at least 90% new stock in both cities, while primary prices can increase from 5% to 8%.
However, Vietnam is not only aiming for post-pandemic development. Volodarsky said: “Authorities are laying the groundwork for the transition to a high-income economy by 2045. Currently, the potential in Vietnam is huge. This country thrived even during the pandemic while many others fell.”
By Cafeland