The remarkable points of the real estate market

The shortage of affordable apartments is one of the concerns.

Lack of affordable supply

According to databythe Vietnam Real Estate Brokerage Association, in the third quarter of 2020, the country had nearly 74,000 apartments and 27,000 low-rise apartments. Transactions on the whole market reached 26,000 products, in which the absorption rate was only 35.5%.

In the Hanoi market, in the third quarter, affordable apartments continued to account for a small proportion in the structure of the supply of apartments but withrelatively good absorption rates. Meanwhile, the supply of new high-end apartments to the market is very limited because the absorption rate of this segment is at a very low level, only about 10%. The price of mid-end and high-end apartments is likelyunchanged, with the affordable segment increasing slightly by about 3-5%.

However, a remarkable detail in the report of this unit is that the products offered for sale are mainly inventories from the previous quarters, accounting for about 70%.

According to Mr. Nguyen Van Dinh, General Secretary of the Vietnam Real Estate Brokerage Association, the status of real estate project development in Hanoi in the last 2-3 years has been very sluggish, there are almost no new projects approved for investment at this stage.

Projects that have been started in the previous phase slowly supply products to the real estate market of Hanoi, on average, the new supply to the market is only about 2,000 products in a quarter. This is too small a number for a city with nearly 10 million people. In the new supply from real estate projects in Hanoi, there are very few products in the affordable segment. Projects with products in this segment are usually located in developing suburbs such as Dong Anh, Gia Lam and Ha Dong. The absorption rate in this segment is always maintained at a very high level of about 70%. The consumption of mid- and high-end products is very slow, especially in the high-end segment.

“So far, we have not seen a phenomenon of real estate projects announcing discounts, only the phenomenon of giving huge gifts and big promotions in some projects to stimulate demand instead of reducing product prices. Before, during and after the pandemic, selling prices of middle and high-end apartments were almost unchanged, meanwhile, there are a number of projects in the affordable segment at present prices have been pushed up to reach the mid-range segment. Due to the scarcity of products and the popular product line, land prices in the projects have increased,”said Mr. Nguyen Van Dinh.

In Ho Chi Minh City, in the new supply structure in the third quarter, affordable apartments continue to appear in the market. Notably, this phenomenon took place from the first quarter in 2020. Due to the scarcity of products in the context of very high demand, the apartment prices here soared, and the absorption rate is always high. Specifically, the price of apartments in the third quarter increased sharply by 15-20% compared to the second quarter, creating a “fever” for the real estate market.

“Due to the scarcity of products, many investors have to look for land plots.Thus, this creates a sharp increase in land prices in some districts such as BinhChanh, Go Vap and Cu Chi, the price ranges from VND30 - 50 million, up from 10-15%,”said Mr. Nguyen Van Dinh.

Industrial real estate benefits

Despite the negative impact from the Covid-19 pandemic, the real estate market still recorded bright spots coming from the industrial real estate segment with positive developments from significant growth in rental rates and occupancy rates.

According to the latest report by JLL Company, the restriction of movement during the outbreak has made it difficult for the project site and face-to-face meetings with industrial park developers. However, the demand for industrial land still kept increasing in the third quarter as Vietnam remained a favorable destination for investors. In the context of the Covid-19 pandemic, tenants still have the opportunity to evaluate the potential and rent land remotely through online platforms such as online virtual fieldwork and online seminars.

All of these factors have pushed the average occupancy rate of industrial parks in the Northern provinces including Hanoi, Hai Phong, Bac Ninh, Hung Yen and Hai Duong to increase 160% compared to the first quarter, reaching 74% in the third quarter in 2020. With a large existing land bank, Hai Phong and Bac Ninh are the leaders in the supply of industrial land in the North.

In the context of the coming investment wave, the provinces and cities in the North have planned to add new and expand existing industrial zones, in which Hung Yen and Hai Duong are the most active localities in developing new industrial zones.

Accordingly, land rental prices have reached a new peak of US$102 per m2 per rental cycle in the third quarter, up 7.1% compared to the same period last year.

Prefabricated factory rents also increased slightly by 2.1%, ranging from US$4.1-5.2 per m2 per month. Meanwhile, according to Pham Ngoc Thien Thanh, Deputy Director, Research and Consultancy (CBRE) of Vietnam, the occupancy rate in industrial zones of the four key industrial cities in the South is about 84.5%. Operating industrial parks in Binh Duong, Dong Nai and Long An have all achieved an average occupancy rate of over 80%, and HCMC alone at over 90%.

Although the Covid-19 pandemicmay temporarily disrupt investment in Vietnam, interest from investors remains strong. According to Mr. Nguyen Quoc Anh, Deputy General Director of Batdongsan.com.vn, the effect of the EVFTA has made investment attraction in industrial zones a clear breakthrough, many multinational corporations have planned to move their factories from China to Vietnam. Thanks to its cost-effective advantages, development of infrastructure and supportive policies from the Government as well as a very effective disease control, Vietnam is being evaluated as an ideal choice of foreign investors compared to other countries in the region.