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Vietnam Real Estate Industry Report 2021

Vietnam Real Estate Industry Report 2021

Wednesday 23, 06 2021

REAL ESTATE INDUSTRY

Real estate plays an important role in Vietnam economy through its spread ability to other development of economic industries such as construction, manufacturing, tourism, accommodation, finance & banking, construction materials, interior and exterior furniture. After a slowdown stage (2011 - 2012), Vietnam's real estate market has gradually been "hot" again. Many people are concerned about the downside when credit and investment capital are flowing into real estate market. In addition, the high level of real estate price poses certain challenges in management against "real estate bubble" situation.

REAL ESTATE INDUSTRY OVERVIEW 2020

The outbreak of COVID 19 pandemic caused real estate market to fall into "hibernation" when exacerbating financial, income and psychological factors. That led to a sharp decline in demand. The market also showed a decrease in supply of projects and housing products, especially in affordable and social housing segments. Due to unfavorable conditions from the market, a number of newly - registered real estate businesses was 6,694, down by 15.5% compared to 2019. Nearly 1,000 enterprises completed dissolution procedures. Real estate industry contributed about 4.42% to GDP in 2020 (Vietnam Ministry of Construction).

Number of new residential real estate offered and transactions in 2020 only reached 87.6% and 46.6% compared to 2019. Tourism real estate (condotel...) and complex real estate (office for lease...) were also affected by the pandemic. Meanwhile, industrial real estate has become more vibrant in many provinces such as Long An, Dong Nai, Binh Duong, Binh Dinh, Thanh Hoa, Quang Ninh, Hai Duong, Bac Giang ... The relocation of factories in Vietnam is expected to promote industrial real estate development. The occupancy rate in this segment was quite high (over 70%) in 2020.

Overview

M&A ACTIVITIES

In the context of many existing difficulties, M&A activities in real estate industry plummeted (estimated to be halved) compared to 2019. For leading real estate companies with strong financial situation, M&A considers as one of feasible solutions to develop land fund and take over investment projects (such as Novaland, Nam Long Group…). Vinhomes expands ownership ratio for foreign investors.

LAWS AND RELEVANT DOCUMENTS

Laws and relevant documents are quite sufficient to regulate real estate market. In 2020, Vietnam National Assembly issued new laws such as enterprise law, real estate business law, investment law, construction law… The State’s tendency is to increase investment incentives, simplify administrative procedures and create favorable conditions for enterprise establishment and management. However, the State also regulates the purchase, sale, and transfer of real estate projects more stringently... by increasing fine amount up to VND 300 million for projects that do not have a land ownership certificate to protect consumer’s interests.

HO CHI MINH AND HA NOI REAL ESTATE MARKETS OVERVIEW

Ho Chi Minh City real estate market showed a sign of oversupply in high-end apartment in 2020. The supply increased sharply in mid-end apartment (+66.2%). Meanwhile, the supply dropped significantly in affordable apartment (-98.6%). In general, the market was in a state of imbalance between supply and demand, making it difficult to stabilize social security. In the future, main drivers will boost the development as the establishment of Thu Duc city, the improvement in key districts and the transformation of 26,000 hectares of agricultural land.

Ho Chi Minh City

Ha Noi real estate market had phenomenon of high increase in land price in some areas. Besides the impact of urbanization, the speculative transactions also moved up land price. The absorption rate was high in affordable apartment but low in the high – end and mid – end apartments. The average absorption rate only stood at 26.60% for the whole year 2020.

Hanoi

CHALLENGES AND INDUSTRY PROSPECT

Basically, the COVID 19 pandemic is well - controlled in Vietnam. However, the pandemic is still complicated in many countries around the world. That vaccination rate in Vietnam is quite low that could make a lag compared with other nations. In addition, high real estate price but poor purchasing power creates concern about "real estate bubble". However, the likelihood of this scenario is low.

Demand for housing and investment forecasts to bounce back. This helps to narrow the difference between supply and demand in the market. In general, real estate is still the preferred investment channel under investor's perspective. Nevertheless, it is not advisable to follow this trend at the moment.

VIETNAM REAL ESTATE INDUSTRY REPORT 2021

Bao Huynh - VietnamCredit

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