Real estate poised for positive 2019

Vietnam continues its rapid development with a slew of new property types springing up in recent years, Photo: Le Toan

According to the Foreign Investment Agency under the Ministry of Planning and Investment, real estate business ranked second in size since early this year, with total registered capital of $6.5 billion in 87 new registered projects.

“With foreign direct investment (FDI) being funneled into the real estate sector, Vietnam remains an attractive destination for real estate investment in 2019 and beyond. It is because the demand for residential real estate, industrial zone infrastructure, trade centres, and resort real estate remains high,” said Nguyen Tran Nam, chairman of the Vietnam Real Estate Association.

According to the country’s housing development strategy, the average housing area of the nation will reach 25 square metres per capita by 2020. To achieve this goal, 100 million sq.m of new housing will be built each year, 70 per cent of which will be in urban areas.

In Ho Chi Minh City, 65 projects with the total of more than 22,600 units and over 1,000 low-rise buildings were launched to the market in 2019. Of these, affordable housing occupy more than 4,500 units, or 19 per cent of the total. The high-end housing has shown the first sign of oversupply with more than 11,700 units, or 31.3 per cent.

“There is a serious shortage of affordable and social housing for the market, especially cheap units for leasing which are affordable for the majority of the people. This is a warning sign for the market,” said Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association.

Between the beginning of 2017 and October this year, the outskirt areas of the future Long Thanh International Airport and the three future special economic zones of Van Don, North Van Phong, and Phu Quoc suffered from so-called land fever and the accompanying surge in prices.

New housing types have appeared in Vietnam such as condotels, hometels, officetels, serviced apartments, and shophouses. Some of these projects have not been registered with authorised agencies and pose high risks to investors. However, the larger market has not shown any signs of house or land fever yet.

According to CBRE senior director Dung Duong, the real estate market in 2018 has seen positive developments, especially with foreign buyers increasing their presence in Vietnam. Some 76 per cent of CBRE’s successful transactions involved overseas buyers.

In the leasing market, a shortage of supply in recent years in Ho Chi Minh City has opened many opportunities for developers.

The shortage of supply has increased prices at offices for lease. Leasing rental now is averages at $43 per sq.m per month in Grade A, an increase of 17 per cent compared to last year.

“Ho Chi Minh City is now ranked among the top 40 cities in the world which have the most expensive offices for lease,” Dung said.

The protectionism and trade war between some big countries have also had an impact on Vietnam and can slow down global economic growth and reduce aggregate demand.

On the positive side, the Asian region still retains its growth potential, especially in Vietnam, the Philippines, and Indonesia, which are expected to have the highest growth rate, attracting more investment.

Particularly, after the Comprehensive and Progressive Agreement for Trans-Pacific Partnership comes into effect in early 2019, Vietnam will have a positive impact on the industrial property market, the office leasing market, and rental apartments.

However, there remain key bottlenecks for the real estate market, including land bidding procedures, land clearance and compensation, calculating land-use fees, tightening credit policy from the State Bank of Vietnam, and complicated administrative procedures.