Real Estate Market 2020 Increasingly Stable and Vibrant

9:49:41 AM | 31/12/2020

If 2020 is a sad song for the economy and the whole society in general, real estate is considered to be composed with low notes and high notes.

Signs of recovery

Like other sectors ravaged by the strong impact of the Covid-19 pandemic, real estate was overshadowed by a lackluster outlook. Many investors became cautious and businesses were fraught with difficulties. Real estate projects delayed their launch schedules and many property exchanges suspended or stopped working. But, this was also a test in the transitional period. Short-term investors will have to give way to long-term financially viable investors. Property brokerage floors that adapted to new changes and made investment for sustainable development and resources will survive.

Remarking on Vietnam's real estate market in 2020, Mr. David Jackson, CEO of Colliers International, said, “In 2020, the real estate market of Vietnam has undergone a correction and returned to 'more stable development' than a few years ago when land prices grew 'hot', especially office and residence segments in Ho Chi Minh City and surrounding areas. The Covid-19 pandemic had strong influence and triggered a global health crisis, mobility restrictions and social distancing reduced investor enthusiasm and caused investors to be more cautious with new investment decisions. However, in the third and fourth quarters of 2020, the retail market has shown signs of recovery and resilience.

According to integrated data made from reports of 56 out of 63 provinces and cities by the Ministry of Construction, successful property deals in the third quarter increased by 10-25% from the second quarter of 2020, evidenced by regularly transacted condos and good absorption of well-progressed projects. Ministry of Construction data also showed that apartment prices rose by 0.24% in the third quarter in Hanoi from the previous quarter (high-class condo prices slipped 0.07%, mid-end apartments prices increased by 0.44%, and affordable apartment prices gained 1.02%). Separate housing prices edged up 0.03% from the second quarter of 2020. Affordable property projects, typically located in suburban districts of Dong Anh, Gia Lam and Ha Dong, reported an adoption rate as high as 70%.

In Ho Chi Minh City, apartment prices in the third quarter looked up 0.35% from the previous quarter (high-end, mid-end and low-end apartment segments rose by 0.16%, 0.72% and 0.85%, respectively). Separate housing prices grew by 0.26% from the second quarter of 2020.

Residential land and industrial real estate: In the limelight

For nearly a year, despite numerous difficulties, the real estate market still fared well. Residential land and industrial real estate are the two brightest segments on the market. For industrial real estate, this segment attracted a huge amount of foreign investment capital and stimulated vibrant market development. Mr. David Jackson said, “The U.S. - China trade war together with the Covid-19 pandemic prompted many manufacturers to divert investment and development to Vietnam. Vietnam's entry to many trade agreements such as the EU - Vietnam Free Trade Agreement (EVFTA) or the Regional Comprehensive Economic Partnership (RCEP) is a huge advantage for the industrial real estate segment to thrive and become the hot pick for the time being and expectedly throughout 2021."

According to CBRE, as of the third quarter of 2020, the average occupancy rate in industrial parks was positive, at 79%. Industrial zones in Hanoi, Hai Duong and Bac Ninh reported the average occupancy rate of 90%. For the southern market, the total industrial land area doubled that in the north, totaling 38,000 ha, of which 24,000 ha was leased. The occupancy rate in Ho Chi Minh City, Binh Duong, Long An, Dong Nai and Ba Ria-Vung Tau was nearly 77%. Notably, the pandemic did not affect residential land prices in Hanoi and Ho Chi Minh City, which even rose slightly.

New stimulation

Later in the year, real estate transactions are becoming more active thanks to the Government's timely and close support policy for businesses after the social distancing period, thus adding growth momentum for the market. In addition, some other factors have stimulated the market rebound. For example, excess deposit funds at banks caused interest rates to drop sharply and forced banks to launch many incentives concerning interest rates and debt grace period. Investors gradually adapted and quickly responded. Many investors focused on investing in increasing services, offering professional incentive programs to lure customers such as giving vouchers, extending payment schedules and offering high discounts. At the same time, they diversified market supply sources aimed to stimulate and meet diverse customer needs after the pandemic ends.

Therefore, investors are positively responding to the reintroduction and opening of sales from affordable to high-end apartment segments. Typically, BCG Land Joint Stock Company, a member of Bamboo Capital Group, with King Crown Infinity Project covering nearly 1.3 ha with 30-storey twin trade and residence towers (Apollo and Artemis) was expected to add a new vitality to the luxury real estate segment of Thu Duc City, become a blockbuster on the real estate market in late 2020 and early 2021.

Besides, the Government's policy of upgrading and expanding transport infrastructure has supported the real estate market development. In 2020, 10 major traffic projects were kicked off, including Noi Bai Airport terminal upgrade, Vinh Hao - Phan Thiet Expressway, My Thuan 2 Bridge and Tan Son Nhat Airport. This large transport project will strongly impact the domestic real estate market in 2021.

By Nguyen Mai, Vietnam Business Forum