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Vietnam’s real estate is expecting a comeback

Vietnam’s real estate is expecting a comeback

Friday 03, 09 2021
The Vietnam real estate market is at a point of struggling with the fourth pandemic wave. However, the market is expected to recover when the spreading disease is suppressed.

The residential estate is on recovery

In the near future, opportunities for the residential real estate segment will appear, despite the hardship it encounters up until recently.

In Hanoi, the supply of new apartments in the second quarter of 2021 declined by 36.7% compared to the same period last year. New products available were at 3,526 units, which led to a 14.6% decrease in transactions compared to 2020. House prices in Hanoi increased in the second quarter.

In Ho Chi Minh City, apartment consumption recovered strongly in the second quarter of 2021, up 143.1% over the same period in 2020, reaching 4,700 units, thanks to a new supply increase of 141.4% over the same period in 2020, reaching 3,968 units.

Ho Chi Minh

In the second quarter of 2021, the average selling price of primary apartments increased by 16.5% over the same period in 2020 to 2,260 USD/m2, the price of secondary townhouses also increased sharply by 17.9% over the same period in 2020 to 4,202 USD/m2.

Real estate supply is recovering because of legal easing, while demand is also strongly boosted by a large-scale recovery of the market, low home loan interest rates. Infrastructure development is being accelerated, so experts believe that the real estate market may enter a favorable time from the fourth quarter of 2021.

Three main factors are driving residential real estate demand in the second half of 2021 and 2022. Those factors are the recovery of the market, home loan interest rates continue to remain low, and infrastructure is greatly boosted.

Anticipating a large-scale recovery of the real estate market

The vaccination progress is getting faster, assisting a quicker reopening of the world economy in the latter half of 2021.

As a highly open economy, Vietnam may have many opportunities when global purchasing power recovers. Vietnam's positive economic data in the first 6 months of 2021 is a clear indicator of a recovery in the next few years. It is forecasted that the country's GDP will grow by 6.5-7.4% year-on-year in 2021-2022, respectively, thanks to the expansion of the manufacturing industry and the strong recovery of the service industry.

Besides, while inflation risks are increasing along with macro growth momentum, it is still under control. Vietnam's inflation may continue to be controlled in the second half of 2021 thanks to two main factors:

  • The decrease in the food CPI in the context of falling pork prices.
  • The Government's application of effective inflation control.

Home loan interest rates remain low

Home loan interest rates continue to remain low, helping to stimulate home buying demand.

Home loan interest rates of domestic banks were relatively stable at 9.2-9.5% in the first half of 2021, still the lowest level in 10 years. It is expected that the State Bank (SBV) will maintain an accommodative monetary policy in 2021 as inflation remains under control.

In the context of complicated epidemic developments, causing heavy damage to life and production, the SBV is unlikely to raise interest rates in 2021 to continue supporting the economy by maintaining policy easing. currency. Accordingly, mortgage interest rates are expected to remain low in 2021, thereby supporting real estate demand.

Accelerating infrastructure development

Accelerating infrastructure development will be the driving force behind the growth of the real estate market in the future.

The Government is taking more drastic actions to promote public investment in the second half of 2021, especially investment in infrastructure development to promote economic recovery. On July 9, 2021, the Ministry of Construction issued Directive 01/CT-BXD on speeding up the implementation and disbursement of the 2021 public investment capital plan. Accordingly, the disbursement of public investment capital was approved and directed to complete 100% of the target in 2021.

The promotion of infrastructure development is considered to have a direct impact on the real estate market. It will become the main growth driver of real estate in the coming years. Some projects that have a positive impact on the real estate market have started construction in 2021. Long Thanh International Airport phase 1; 6/11 North-South expressway component projects are under construction. There are five other projects expected to start construction this year.

Besides, real estate investors are adapting better selling solutions. Investors are coming up with new support policies to attract buyers. Some projects offer a support package that allows buyers to move in after paying 15 - 30% of the value such as the New City Thu Thiem project, projects of VHM. Masterise cooperated with Techcombank to launch a new housing solution "A House for a House" to attract investors. This policy is expected to help attract investment and help homebuyers shorten the time to upgrade apartments.

Real estate investors

Investors are also promoting digitalization in selling techniques. Vinhomes and Sunshine Group introduced their mobile applications, allowing buyers to make an “online visit” to a house on sale, talking directly to a broker to get help in purchases.

In the market report of the second quarter of 2021, the Ministry of Construction assessed that in the second quarter of 2021, there was no new inventory of real estate from the primary market. The inventory of real estate products not yet transacted is almost exclusively available to secondary investors and some types of real estate are being heavily impacted by the pandemic, such as tourism and resort real estate.

Logistics and industrial real estate maintain growth momentum

The burgeoning e-commerce and third-party logistics (3PL) services have attracted significant interest from investors in the logistics and real estate industry. Accordingly, many foreign logistics service providers and e-commerce operators are also making great efforts to not miss the opportunity to penetrate the Vietnamese market.

As of the end of the second quarter of 2021, the market still recorded quite good activities. The total registered FDI in the manufacturing industry reached 6.97 billion USD. Current production capital is still at 3.38 billion USD, higher than 3.23 billion USD in the same period last year. The market also received many large investments in the first half of the year. In the North, Jinko Solar Hong Kong has invested nearly 500 million USD in Song Khoai Industrial Park, in Quang Yen (Quang Ninh); Fukai Technology of Singapore invested in Quang Chau Industrial Park in Bac Giang province.

FDI

Meanwhile, new investment deals are taking place. Typically, Boustead Projects acquired a 49% stake in KTG Bac Ninh Industrial Development Joint Stock Company in Yen Phong Industrial Park for about 6.9 million USD. The market also welcomes many new investors to the market, such as GNP Industrial or Vietnam Industrial Park Industrial Joint Stock Company, which can be seen as signs that the potential of this market will continue to increase even during the pandemic.

Many factors make Vietnam one of the strongest manufacturing and logistics markets in the world, such as stable politics, business environment, suitable geographical location, dynamic workforce, etc. Free Trade Agreements are considered a long-term solution for Vietnam, supporting the transfer of knowledge and technology, thereby promoting the transition from low-value industries production higher-value ones. Even in the short to medium term, the market still sees a lot of large industrial investment activities in Vietnam.

In the long term, a high-quality industrial park will have a growth advantage in a vibrant market. The integration of housing elements in the industrial park should not simply stop at having a place to rest for workers, but should also provide facilities for quality housing, retail, education, and entertainment, to serve the needs of the public and workers, professionals, tenants. By serving those purposes, industrial park projects will create an investment attraction, especially attracting businesses operating in the high-value industrial sector.

The adjustment in the policy is expected to bring about positive changes, which can be considered one of the initiatives to help the Vietnamese industry have many projects to catch up with the investment trend in the market.

 

Source: The Ministry of Industry and Trade

Compiled by VietnamCredit

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