The real estate market in southern Vietnam will regain momentum rapidly this year, says Vo Hong Thang, R&D deputy director of property services provider DKRA Vietnam.
The Vietnamese economy was hit hard by the Covid-19 pandemic. What was the impact on the real estate market?
Most of the real estate projects saw no construction work during social distancing. Supply in the market was already low, then became even lower. Deals were frozen because no offline trading activities were organized, no customers met with sellers or brokers.
It was obvious the market was down in most segments including land plots, townhouses, villas and apartments. The hospitality segment was affected the worst and for the longest time.
What impact did this have on prices? Did they go down, too?
Despite the silence in the market during last year, prices in the primary market increased significantly in most segments and provinces. The average increase was about 10-15% compared to 6-8 months before. Some projects even saw prices go up 30-35%.
How can this paradox be explained?
There were different reasons. I would say the main cause was low supply, but buyers kept pouring money into the market.
Moreover, the land area used for project development, especially in inner-city areas, has become more and more limited. Legal bottlenecks are still there. Licenses for new projects cost time. The project implementation time has been prolonged, increasing the cost of documents and procedures as well as capital. New supplies for sales dwindled.
According to our research, in the apartment segment alone, new supply in 2021 was only about one-third of that in 2017. Most of the products open for sales were positioned in the high-end segment. There was land fever, too, both real and made-up, in some localities.
These things kept pushing the price up to beyond the ability of buyers with real needs.
And now, when the economy is getting back on track?
It is true that business has recovered since the end of 2021. This economic recovery is significant for the real estate market. According to DKRA Vietnam statistics, in the first quarter of 2022, both supply and purchase increased significantly compared to the previous quarter and the same period of 2021. It can be said that the southern market now offers many opportunities.
Please tell us about the opportunities.
In 2022, the market is still facing many challenges including the pandemic and legal regulations. However, it is likely to regain momentum fast. The government expects the 2022 GDP growth at 6-6.5%, while the IMF and World Bank have forecast 6% and 5.3%, respectively. Vietnam is an export-driven economy, with more than 20 new-generation free trade agreements in place now.
The government’s $15.4 billion stimulus package this year is expected to fuel the recovery. One third of the package will be spent on infrastructure development.
Public-funded traffic infrastructure works being implemented and to be implemented will promote regional connectivity. They include Long Thanh International Airport, beltways 3 and 4, expressways, seaports and inland ports. These are very positive factors for the real estate market.