Vietnam's real estate market is forecast to only recover and develop in a healthier and more transparent way from the second or third quarter of 2024, wrote Dr. Nguyen Van Khoi, chairman of the Vietnam National Real Estate Association (VNREA).
Vietnam's real estate market is forecast to remain quiet until the end of 2023 and only recover and develop in a healthier and more transparent way from the second or third quarter of 2024.
The forecast was backed by legal improvements, positive economic growth prospects, synchronous and modern infrastructure development, digital transformation, and the application of Industry 4.0 technology, along with diverse financial resources.
Besides the traditional segments such as residential, industrial, resort and office spaces, products in the property market are likely to become increasingly diverse. Housing supply will increase sharply if a project to develop 1 million social housing and worker housing units is implemented.
Residential real estate
The apartment segment accounts for the highest proportion of the residential real estate market, with about 90% of commercial housing supply. It is likely to recover from mid-2024 if market difficulties are removed. According to a 2022 report by Savills Vietnam, in 2022-2025, Hanoi is expected to have nearly 79,000 apartments for sale, meeting nearly half of the demand, while the figure in Ho Chi Minh City will be over 145,000.
Supply structure will become more diverse, with high-end and luxury apartment supply and absorption rate forecast to continue increasing, especially for projects implemented by reputable developers in big cities and prime locations thanks to favorable geographical locations and higher incomes.
In the mid-end and affordable segments, the absorption rate will be lower despite high demand due to increasingly limited supply (accounting for only about 8-10% of the total apartment supply), and prices will continue to increase.
The high-end villa and townhouse segment is projected not to see any breakthrough in the short term, but transaction volume will increase in the 2023-2025 period. The supply in far-flung areas will give buyers many options with more suitable and attractive locations and prices. The engagement of foreign home buyers, foreign investment capital and M&A activities will make the townhouse and villa segment more vibrant.
Regarding the land plot segment, in the 2023-2025 period, old urban areas in major cities are forecast not to see big changes in both price and transaction volume due to increasingly limited land funds, fewer prime locations, and low returns. Meanwhile, surrounding areas/satellite towns of large cities or areas planned to become new cities or districts (especially around Hanoi and HCMC) are expected to see increases in price and transaction volume due to conversion from agricultural land to residential and urban land.
However, these local fluctuations will soon be controlled thanks to the disclosure of official information on local planning, land use plans, land prices and infrastructure construction plans to ensure the safe, healthy and stable development of this segment.
Meanwhile, the demand for housing for low-income people, including social housing and affordable commercial housing, has outstripped the supply. More effective credit support policies are needed to increase liquidity for this national strategic housing segment.
From 2021-2025, about 428,000 social apartments will be completed and the figure will be raised to 634,200 apartments in the next five years. Under a project to develop 1 million social housing units by 2030, the market will have about 100,000-110,000 more social housing units each year.
The capital city of Hanoi is implementing 40 social housing projects, 18 of which are scheduled for completion in 2021-2025, providing about 869,000 square meters of floor space with 12,137 apartments. The remaining 22 projects, with 22,400 apartments and about 1.6 million square meters of floor space, will be completed post 2025.
In the southern economic hub of HCMC, nine social housing projects are under construction or about to be built, covering a total area of 17.54 hectares with 6,383 apartments.
The northern port city of Hai Phong has kicked off a social housing project on an area of 16.91 hectares in Ngo Quyen district, expected to offer about 4,456 apartments. In May 2023, Hai Phong commenced another in the Trang Due Commercial Service and Worker Housing Urban Area, with 2,538 units. On May 30, work also began on a project to build a 5.04-hectare worker housing area to provide accommodations for about 10,000 workers.
In 2021-2025, Bac Giang province, an industrial hub in northern Vietnam, targeted to attract investment in 14 social housing projects, including nine for workers and five for low-income people, with a total of 27,741 units. In the next five years, it intends to implement 22 more projects, including 10 for workers and 12 for low-income people.
The central city of Danang plans to complete about 504,060 square meters of floor space for social housing by 2025 and 954,071 square meters by 2030.
Meanwhile, Binh Duong province, dubbed the industrial hub of the country, will invest in building more than 174,000 social housing units on a total area of 655.1 hectares, meeting the needs of 678,300 people.
Tourism and resort real estate
Tourism and resort real estate is expected to welcome more development opportunities from tourism growth, especially now that China, which accounted for about 30% of international tourist arrivals to Vietnam before the pandemic, has reopened. However, many challenges remain in this segment.
The resort townhouse/shophouse and resort villa segment, especially coastal villas, will grow positively in the 2023-2025 period.
For the tourist apartment segment (condotels), completing legal procedures such as land use right registration and certification; transfer of condotel purchase and sales contracts; ownership, investment and transactions by foreign investors will create a breakthrough for this type of resort real estate, helping it grow in 2023-2025.
Homestays have seen the slowest post-Covid recovery among resort real estate. They are forecast to see positive prospects in the medium and long term along with the trend of experiential tourism, safe and green living, natural landscape conservation, and ecological environmental protection.
Retail and office space
In the retail space segment, after the adverse effects of Covid-19, the development of domestic trade centers has switched from the traditional rental model to a revenue and risk sharing model, with the relationship between landlords and tenants enhanced.
Hotel offices (officetels) are developing in line with new market development trends, creating conditions for employees to maximize productivity, reduce investment time and costs, and achieve high work efficiency.
Regarding serviced apartments, the occupancy rate of serviced apartments in Vietnam is also quite high, up to 90-95%, surpassing the occupancy rate of hotels (70%). Moreover, serviced apartments have stable tenants with long rental periods. With an average expansion of 8-10%, it will be an attractive market.
Industrial real estate
The industrial real estate segment is projected to develop in 2023-2025, especially large-scale and high-quality industrial parks such as ecological and service-urban industrial parks. These are the prominent trends in the industrial real estate market, contributing to improving the efficiency of attracting investment and sustainable development in the long term.
However, it is necessary to invest in building synchronous infrastructure both inside and outside the industrial parks, completing legislation, making synchronous planning, and speeding up site clearance.