2020年越南房地产市场前瞻 Real Estate Market Outlook 2020 in Vietnam

Updated: Apr 26

​前言 Exordium


      As everyone knows, Vietnam has become the favor of more and more overseas investors and no need further explanation here. This article aims to show the investors the prospect of Vietnam's real estate market under the outbreak of COVID-19. We will illustrate from four aspects including economy, condominium, office and retail. Today, we start with an analysis of economy and condominium.

01. 经济 Economy


COVID-19 outbreak set to weigh on gdp growth


      Vietnam’s GDP growth rate registered 7.02% in 2019, exceeding government forecasts. The impressive growth came in spite of U.S.-China trade conflict and regional geopolitical tension. Growth was driven by strong trading activity, with total export values recording US$263.5 billion and total import values standing at US$253.5 billion, leading to a trade surplus of US$9.9 billion, the highest since 2016. Inflation stood at 2.7% y-o-y (year over year), the lowest in three years.


      Prior to the global escalation of the COVID-19 outbreak, expectations had been for another robust year of economic growth. However, due to the outbreak intensification across countries worldwide, the Asian Development Bank believes that ASEAN (Association of Southeast Asian Nations) countries will endure economic slowdown, given their dependence on China’s market. Even though facing significant deceleration in economic growth, Vietnam’s economy is expected to be uniquely robust in the region. Specifically, the country’s GDP growth will drop to 4.8% in 2020 and will recover to 6.8% in 2021.


      Vietnam’s manufacturing sector (especially cellphones, computers, appliances, vehicles, apparel and footwear) is heavily dependent on China for spare parts and raw materials. Disruption to supply has forced many local producers to temporarily cease production since January, leading to a very low growth in exports in Q1 2020. Vietnam is also dependent on the United States and China as export markets for major agricultural products such as rice, fruits and rubber. With the newly outbreak in the United States, Vietnam’s exports have been affected negatively. In the first quarter of 2020, exports grew by 0.5% y-o-y, much lower than the 4.7% y-o-y in the same period of 2019.


      On March 16, 2020, the State Bank of Vietnam announced reductions to key interest rates to support financial market liquidity. The refinancing rate was cut to 5.0% from 6.0%, while the rediscounting rate was reduced from 4.0% to 3.5%. These adjustments are expected to help create favourable conditions for credit institutions to reschedule debt payment deadlines and reduce interest payments for firms affected by COVID-19.


Investment demand expected to weaken temporarily


FDI (foreign direct investment) in vietnam surges to 10-year high in 2019


      Vietnam continued to attract significant foreign direct investment in 2019, recording a rise of 6.7% y-o-y to US$ 38 billion, marking the fifth annual increase. Investment through purchasing shares or contributing capital stood at US$15.5 billion, up by 56.4% y-o-y. Manufacturing & processing and real estate continued to attract the bulk of FDI, accounting for 72% and 11%, respectively, of total registered capital. While Vietnam’s General Statistics Office (GSO) expects FDI to rise 4% y-o- y to US$39.6 billion in 2020, this prediction was made prior to the COVID-19 outbreak, which may adversely affect total investment inflows over the course of the year.


Investment activity slows temporarily


      As of end-March 2020, most investment activity is on hold due to potential cross-border investors being unable to perform site visits. Purchasing is likely to improve once the outbreak has been contained, supported by pent-up investment demand. Assets providing steady income streams will be the focus, while interest in logistics assets will strengthen alongside solid e-commerce industry growth.


Free trade agreements set to facilitate exports


      In January 2019, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership officially came into effect. The agreement is expected to boost Vietnam’s GDP by US$1.7 billion and exports by more than US$4 billion by 2035, representing increases of 1.3% and 4.0% respectively.


      In June 2019, Vietnam and the European Union signed two landmark free trade deals, namely the EU – Vietnam Free Trade Agreement (EVFTA) and the EU – Vietnam Investment Promotion Agreement (EVIPA). The two trade deals are expected to eliminate over 99% of customs duties on exports in both direction and to boost the investment and business climate for investors between the two regions.


Covid-19 poses significant headwinds for tourism market


      Bamboo Airways commenced operations in January 2019, marking Vietnam’s first new airline in eight years and intensifying competition in the domestic aviation market. Several other Vietnamese aviation firms are in the process of undertaking procedures to establish operations.


       Other tourism highlights from 2019 included February’s Trump – Kim Summit in Hanoi, the success of which augmented Vietnam’s status as a location for high-profile meetings and helped boost overseas interest in the country. The number of international arrivals in 2019 surged by 16.2% y-o-y to 18 million, a record annual total. China and Korea remained the two main tourism source markets, accounting for 32% and 23.8% of total international arrivals, respectively.

      由于新冠爆发导致的旅游限制、检疫法规和不愿旅行将严重影响越南2020年上半年的酒店市场。许多重要赛事,如河内一级方程式大奖赛,已被推迟或取消,预计游客人数在爆发期内将减少至少50% - 60%。

      Travel restrictions, quarantine regulations and reluctance to travel due to the COVID-19 outbreak will severely affect Vietnam’s hospitality market in H1 2020. Many key events such as the Hanoi Formula 1 Grand Prix have already been delayed or canceled, with the number of tourist arrivals expected to decrease by at least 50 – 60% for the duration of the outbreak.

02. 公寓 Condominium


Condominium supply


New launches moderate to a more sustainable momentum


      Recent years have seen the condominium market in Vietnam extend development to new areas, introduce a wider range of high quality formats, and adopt advanced sales procedures.


       In 2014, the supply of new residential units in Hanoi and HCMC stood at around 12,000 – 15,000 units per year in each city, a figure that doubled to around 30,000 units per year in each city in 2017-2018. Around 26,000 new units were launched in HCMC in 2019 while 36,000 were added in Hanoi the same year.


       Headwinds including licensing issues, credit tightening and the COVID-19 outbreak are set to weigh on new condominium supply in both cities in 2020. Assuming that the pandemic ends by the end of Q2 2020, Hanoi and HCMC are expected to each see the addition of approximately 27,000 – 28,000 units during 2020.


      Demand remains strong thanks to rapid urbanisation, rising incomes, a growing middle class, access to mortgage financing and improving infrastructure. While foreign buyers retain a strong interest in HCMC and Hanoi due to the relatively attractive yield, slow purchasing momentum in H1 2020 may pull down the annual total of sold units to 29,000 in HCMC and 24,000 in Hanoi.


      Average primary prices are projected to increase in both cities due to weaker new supply and product quality, with CBRE forecasting increases of between 5%-7% y-o-y.


      The challenge facing authorities and developers is to maintain the current pace of development while mitigating the risk of overheating. End-users are increasingly selective when evaluating potential acquisitions, while investors are seeking a wider range of options to diversify their portfolios.


Condominium buyers and investors


Secondary market gains traction as demand grows


End-users look to secondary market


      End-users seeking condominium units in core districts of Hanoi and HCMC are increasingly turning to the secondary market due to the lack of primary stock.


      Buying on the secondary market has its advantages and disadvantages. On the positive side, units have already been constructed, meaning that buyers can view the finished property before they purchase, and are not restricted to viewing a show flat or a brochure. Buyers can also opt to rent units in a secondary project to experience its amenities, management quality and the neighbourhood before they commit to a purchase. Disadvantages include tighter payment terms compared to the primary market, where installments coincide with construction phases.


      Mortgage loans are becoming easier for condominium projects, with loan-terms of 15-20 years now commonplace, and 35 years possible for projects by reputable developers. Borrowing is capped at 80% of the total unit value.


Foreign buyers and investors


      Speculative activity was limited in 2019 and in Q1 2020 due to the lack of supply in the high-end and luxury segments. Mid-end projects in emerging locations such as West Hanoi and District 9 in HCMC are emerging as properties of choice among buy-to-let investors.


      HCMC has attracted considerable interest from foreign investors in recent years due to its rapid price growth and relatively attractive value compared to other Southeast Asian markets such as Bangkok and Singapore. However, overseas interest is now turning to Hanoi due to rising prices and a lack of supply in HCMC.


      The rising numbers of expatriates in Vietnam will fuel demand for housing from foreign end-users and investors in 2020. The high-end and luxury condominium segments are the main area of focus, with recent launches reporting high levels of pre-sale reservations and new projects due this year also expected to perform well.


Condominium developers


New approach to land-banking, sales and property management


      Buyers’ changing preferences and uncertainty around credit tightening and licensing issues are prompting developers to re-think land-banking strategy, sales models and property management.


Land-banking strategy shifts away from prime areas


      Land in prime locations or developed residential areas of HCMC and Hanoi and HCMC is increasingly scarce. This has seen developers launch new projects – especially township developments – in convenient locations expected to benefit from future infrastructure improvements. Projects featuring differentiation in terms of amenities, landscaping and product type have performed well – a trend expected to continue in 2020.


      In HCMC, the East and the South remain key hotspots due to the relative availability of land near the CBD and good infrastructure. In Hanoi, the West remains the main focus, but the East (Gia Lam or Van Giang district in Hung Yen) will be the second main source of new supply in 2020.


New sales model and focus on property management


      Intense competition for sale is encouraging the adoption of a new sales model. Large projects are pursuing an aggressive sales strategy, with Vinhomes allowing 63 agencies to distribute its township project in District 9, HCMC and more than 20 agencies to distribute each township project in Hanoi.


      Post-sales activity, especially property management, has also become more important in recent years, and is set to take on a new dimension following the COVID-19 outbreak. End-users and investors now expect higher standards of property management, with CBRE anticipating increasing demand for better sanitisation practices and attention to other hygiene-related issues.


      Together with high quality construction and timely handover, professional property management will be critical to shaping a developer’s reputation and generating future sales.


Government policy


Focus on law revision, credit tightening and modern housing


      The Vietnamese government has put great effort into ensuring the Vietnam condominium market maintains a stable and sustainable growth momentum.


Proposed law revision


      The government is presently considering proposals to revise the Construction Law, Investment Law and Land Law. Key review items in each law include:


• 审查地方政府对发展楼盘的审批程序

• 审核未拿到施工许可的楼盘

Construction law (due to be reviewed in May 2020):

• Review the approval procedure of development projects by local governments

• Review projects with pending construction licenses


• 解决投资法、投资程序和住房法术语上的不一致

Investment law (due to be reviewed in May 2020):

• Address the inconsistency in terminologies between the investment law, investment procedure and housing law


• 更新土地法以反映快速增长的房地产市场

Land law (due to be reviewed in late 2020):

• To be updated to reflect the fast-growing real estate market.


Credit tightening


      The government has implemented several steps to restrict excessive credit flowing to the real estate sector. Key measures include:

• 越南国家银行将房地产贷款的风险系数从2016年的150%提高到2017年的200%。

• 越南国家银行将用于中长期贷款的短期资本比例从2017年的50%降至2018年的45%、2020年的40%,并计划在2021年和2022年分别降至37%和30%。

• The State Bank of Vietnam increased the risk coefficient for real estate loans from 150% in 2016 to 200% in 2017.

• The State Bank of Vietnam reduced the proportion of short -term capital used for medium- and long-term loans from 50% in 2017 to 45% in 2018, 40% in 2020 and plans to reduce it to 37% in 2021 and 30% in 2022.


      Although these measures may increase barriers for developers to access funding, the steps aim to ensure market stability. Following a long period of strong credit-fuelled development, recent years have seen developers rationalise new projects, leading to more conservative supply growth.


Promotion of modern housing developments


      The government is supporting the development of modern housing concepts such as condominiums or landed property in township developments as part of an overall focus on raising living standards.

      根据越南中央统计局(GSO)的数据,2019年越南人均居住面积为23.2平米,比2009年上升39%。根据《关于2020年国家住房发展战略和2030年规划的第2127/QD - TTg号决定》,目标要增加到2020年的25平米和2030年的30平米。越南人均建筑面积目前仅为在马来西亚、泰国和新加坡的63% - 70%,这意味着存在重大改进的可能性。

      According to the General Statistics Office (GSO), the average living space in Vietnam was 23.2 sqm/person in 2019, an increase of 39% in on 2009. This is targeted to increase to 25 sqm by 2020 and 30 sqm by 2030 in accordance with Decision No. 2127/QD – TTg regarding National housing development strategy to 2020 and vision to 2030. Vietnam’s floor area per person currently stands at just 63% - 70% of that in Malaysia, Thailand and Singapore, implying significant potential for improvement.

© 2023 by Phoenix Shanghai Realty