The Vietnam real estate market in the first six months of 2021 witnessed a strong fluctuation. After the pandemic was subdued, the real estate market recorded positive signs of significant recovery in the first quarter of 2021. Industrial real estate attracted many investments, land and apartment price increased. However, the new pandemic wave that burst in the middle of the second quarter harmed the real estate market. Thus, the real estate market in Vietnam in the latter half of 2021 will depend greatly on how the pandemic is handled. Though, the market still shows positive signals from investment capital.
In Hanoi, apartment prices increased due to scarcity of supply. Data from Savills showed that in the first quarter of 2021, there were about 3,900 new apartments on the market coming from three new projects and 10 launched projects, down 29% quarter on quarter and 19% year on year. The price increase reflected the belief of investors, created positive competition in the market.
In Ho Chi Minh City, apartment supply was on a strong recovery, with 3,900 new apartments open for sale, increased by 73% compared to the same period last year; total consumption was about 4,000 apartments, up 98% compared to 2020. Markets in Dong Nai province, Ba Ria – Vung Tau province, Phan Thiet province, etc., have many well-invested projects with abundant supply and diversified products continuously receive special attention from investors with impressive numbers. Typical projects are NovaWorld Phan Thiet, NovaHills Mui Ne, Aqua City, and other projects in the downtown area of the city. Ho Chi Minh City brought Novaland Group 4,507 billion VND in net revenue in the first quarter of 2021, up 158% over the same period in 2020.
On a positive scenario, the market will recover partly in the mid-third quarter and thrive again in the fourth quarter, hypothetically speaking that 50% of the people will be vaccinated, and companies will have a 100% rate of employees’ vaccination. In this scenario, the last six months market will have a chance to grow by at least 25-30% compared to the first half of 2021 since companies will strive to make up for that period.
In a worse scenario, the third quarter will be spent on efforts to control the pandemic, and there will be vaccines only enough for 30% of the people. Therefore, companies will only achieve a 50% vaccination rate. With this scenario, the market growth rate in the last six months will not be high.
The act of remaining operation systems has already been a burden for enterprises. Business plans will fell apart, which will result in a sharp decline in revenue. If there is no support lent in time, the whole market will hardly grow above the 20% mark compared to the first six months of 2021.
Despite that, in both scenarios, there will still present outside factors that influence the market. These factors include the support from government policies, business support packages, consumer demand stimulus packages, disbursement progress of public investment packages, the progress of removing legal bottlenecks, etc. All of which will influence businesses and investors, either directly or indirectly, leading them to be more cautious.
Although impacted by the pandemic, the real estate market is still regarded as an attractive investment channel by experts and is deemed able to create impulses that can steer the market in the last months of 2021. When the pandemic struck, real estate remains a potential investment channel worldwide. The economic crisis caused by COVID-19 urged the investors to look for safer channels. When stocks and gold fluctuated violently, real estate is considered an efficient channel to keep the money.
Despite the fourth pandemic outbreak, experts predicted that Vietnam would soon be able to control the outbreak and recover the economy.
With the general recovery momentum, the real estate market also sent out positive signals, especially for capital inflows into this field. Currently, there are four main credit channels in the real estate sector, which are credit institutions, private capital flows, FDI capital, and capital from the stock market.
Citing data recently announced by the State Bank of Vietnam, currently, the total outstanding credit balance for real estate loans including home building, home buying, and real estate business is about 1.85 million billion VND, equivalent to about VND1. 20% of the total outstanding loans of the entire economy. Notably, up to two-thirds of these are loans to buy houses, change houses, and one-third to lend to investment and real estate businesses.
Regarding private capital flows, in the first five months of this year, there were 3,500 new businesses in the real estate business, an increase of 57% in the number of businesses, and a 20% increase in the registered capital. There were also about 935 real estate businesses that temporarily stopped operating in the first five months of 2021. That number is an increase of about 30% compared to the same period in 2020.
The third source of capital is FDI capital. By the end of May 2021, the total newly registered capital in the real estate sector is about 740 million USD, accounting for 10.6% of the total registered capital and ranking 3rd in the fields of attracting foreign investment.
Based on those analytics, it can be inferred that for the real estate market in the last months of 2021, industrial real estate, residential real estate, logistics real estate, foundation soil, and warehouses are still good investment channels. Meanwhile, tourism real estate, retail real estate, and office real estate are still experiencing difficulties due to the pandemic impact.
Source: The Ministry of Industry and Trade
Compiled by VietnamCredit
