Recently, Vietnam real estate market witnesses a new peak of investment from domestic and foreign investors, making Vietnam one of the most flourishing markets in South East Asia.
The monetary policy is expected to remain neutral, GDP growth targets at 6.6-6.8% with CPI is lower than 5%, indicating a sustainable growth of Vietnam economy. According to research, there are hundreds of millions of US dollars from foreign investors is ready to be disbursed into Vietnam real estate market. The tourism industry aims to receive 20 million visitors by 2020 after 15.5 million international visitors and 80 million domestic tourists in 2018. Regardless the negative effects of US – China trade war, Vietnam economy is predicted to be positive due to the CPTPP & EU Trade Agreements and FTAs.
Meanwhile, Vietnam’s priorities in investment in infrastructure include 2000 km of new highways, subways systems in Hanoi and Ho Chi Minh City, and many airport expansion and construction projects creating many opportunities for real estate investors and developers.
We have conducted 5 main trends that is expected to lead Vietnam real estate market in the following years.
1.High demands for Mid-end and affordable segment
The total supply of completed apartment in Ho Chi Minh city reached 160,000 units in all segments, making the numbers of apartments in every 1,000 people increase to 17. This created opportunities for investing in mass housing market – the segment with real demand for apartments.
At the same time, the more and more young people are looking for apartments which provide convenient place, full amenities and community connections, regardless they are small in size. This shifted the orientation of real estate market from high-rise apartment projects ( more than 120 square meters ) to small and ultra small apartments.
2. Flexible workspace
Because of the lack of traditional offices in Vietnam, flexible offices has become more and more popular. Currently, there are 25 high-end flexible space operators, some prominent units including Toong, Dreamplex, Circo, Workyos, Kloud, CEO Suites, UP and WeWork specials opened their first headquarters in January. 12/2018.
Vietnam’s flexible workspace market is still considered as a premature market with a lot of opportunities although the first service office Regus, has been operating since 1999.
The demand mainly came from startups due to the flexible time and reducing cost. Currently, coworking operating units are focusing on finding and approaching business tenants who need to transfer and renovate their offices into coworking models through temporary services called tailoring offices. For this type of service, the operating units will search for premises, design and manage flexible workspaces according to each customer’s specific requirements. This is considered to be the trend that will bring more sustainable development for this kind of flexible working space when the market is growing more mature.
3. Office demand due to the technology revolution
Vietnam is witnessing a rapid growth of ecommerce and technology. This creates a strong demand for technology companies to hunt for ideal office buildings, making this group the main tenant for flexible offices. This s the opportunity for investors who can build offices in time to keep up with demand.
For example, Google’s office in Singapore only had 25 employees 10 years ago. To day, the numbers have increased to 1,000 employees. In 2018, Ho Chi Minh CIty also recorded a famous deal of an e-commerce giant who rented an office of 10,000 sqm in Saigon golden area.
Through our observation, the features that technology companies are looking for includes: attractive location for talents, supported by the government, has convenient traffic traffic with live-work-play facilities integrated into the surrounding environment. These are the factors that investors need to consider when invest in office market.
4. E-commerce promotes logistic industry
In Vietnam, the evolution of smartphone and 4G network coverage creates a strong increase in online shopping activities. Therefore, there is increasing pressure on logistics systems, supply chains, distribution and retail channels, as well as factory and warehouse systems.
Logistic is a fundamental element of a successful development of the e-commerce market. Vietnam logistic market attracts many foreign corporation due to it’s prosper opportunities. The establishment of BW Industry Development Joint Stock Company in Vietnam, a joint venture between Warburg Pincus Global Investment Fund and Becamex IDC in January 2018 can be taken as a sign for the great potential sign of this market.
Compared to other countries in the region, Vietnam’s logistics market is still in its uptrend, the market mainly provides low-tech products, developed in remote areas. With the development potential of the e-commerce industry and the manufacturing sector, Vietnam logistics market is expected to set a new peak in the development process, compares itself to other mature market in the area.
5. Hotel lifestyle
Millennials – a generation grows up in the middle of social media evolution and globalization economy. They enjoy having various choice of living space and are always willing to share facilities to each other. With their highly adapted ability, it is not surprising that hotel lifestyle – a modern hotel model with increasing exposure with nature is increasing.
Similar to the co-working space, The demand for hotel lifestyle is a dynamic generation of young people requiring flexibility, openness and cooperation. Millennials are the generation which has no gap between work and play, not shy form of constant business trips, frequent travel or multiple work location. Most important, they are always looking for the experience of being part of a community.
At the moment, many famous place for tourist such as Hanoi, Ho Chi Minh, Da Nang, Nha Trang, Phu Quoc are short in supply of quality hotels. This market is receiving considerable attention from investors especially home owners who own nature-friendly properties with beautiful views.
Time and sustainability are also important factors that need to be considered. Hotel lifestyle projects with modern design and decoration will attract many tourists. Besides, these accommodation spaces need to maintain a consistent performance through regular maintenance, security enhancement and provision of regional specialties for tourists.
In general, real estate market was flourish in 2019. We expect this upward trend still remains in 2020.