The COVID-19 outbreak has taken the world by storm and forced countries into lockdowns and governments to close down schools, restaurants, bars, and other establishments.
Vietnam acted quickly and has seen a comparably low amount of COVID-19 cases, but it will inevitably affect the economy badly.
In this article, we explain how Vietnam’s real estate market has behaved in previous years and how it behaves due to this outbreak. We also write weekly updates about the current situation in the country.
Vietnam’s Ministry of Health’s tally of confirmed cases of COVID-19 remained at 324 as of May 21st. 264 of the patients have recovered and been discharged from hospitals.
The International Monetary Fund (IMF) has claimed that Vietnam’s growth may slow down to 2.7% in 2020, but may pick up to 7 percent in 2021.
Foreigners are still not able to enter Vietnam until further notice. Diplomats, officials, foreign investors, experts, and skilled workers are exempt.
Vietnam’s Ministry of Health’s tally of confirmed cases of COVID-19 remained at 288 as of May 14th. 252 of the patients have recovered and been discharged from hospitals.
Vietnam repatriates overseas Vietnamese that are stuck, working, or studying overseas. 24 persons that were repatriated from Moscow on 2020-05-14 tested positive for COVID-19 and were sent to quarantine on arrival.
29 days have passed since Vietnam recorded any new corona cases.
As of May 7th, the confirmed cases of COVID-19 remained at 271. 232 of the patients have recovered and been discharged from hospitals.
Public beaches in places like Da Nang, Nha Trang, Binh Dinh, Khanh Hoa, Quang Nam, Quang Ninh, Thanh Hoa, and Nghe An have reopened, yet with social distancing restrictions. Besides, tourism activities resumed in Ha Long Bay and Bai Tu Long Bay from May 1.
The International Monetary Fund (IMF) expects Vietnam’s economy to grow 2.7% this year, less than half the 7% rate in 2018 – 2019. Vietnam also suffers hard due to halted tourism, a sector that generates 10% of GDP.
Vietnam’s Property Market in the Past Years
Vietnam opened to foreign investors in 2015 and has grown with an impressive rate since. In 2019, the economy grew by around 7%, a number that will decrease in 2020 due to the SARS-Cov-2 crisis.
The market suffered from a housing bust in 2009, recovered in 2013, and grew much from 2015. Foreign investors see Vietnam as one of the most interesting markets in Asia due to the following reasons:
- It’s one of the fastest-growing economies in Asia
- Eased foreign ownership regulations since 2015
- Increased manufacturing and investments
- Booming tourism
- Preferable demographics and a growing population
- High yields
Worth mentioning is that the GDP per capita has increased almost sixfold since the 2000s, from around USD 390 to USD 2,264 until 2018.
Thanks to increased individual wealth among the Vietnamese and a greater interest among foreigners, numerous new property developments have popped up, boosting prices.
Interestingly, around 1.5 million Vietnamese join the middle-class yearly.
How has Vietnam responded to the COVID-19 outbreak?
Vietnam responded early to the crisis by introducing strict measures and implementing social distancing.
On March 15, Vietnam suspended all visas and denied entry to travelers from the UK and the 26 Schengen countries. Besides, the country suspended the entry of all foreigners from March 22 until further notice to limit the spread of COVID-19.
From April 1st to April 22nd, we also saw the closures of bars, restaurants, barbershops, cinemas, gyms, and more as Vietnam introduced a period of self-isolation, to avoid spread.
At the same time, Vietnam has sent hundreds of thousands of face-masks and other equipment to countries that have suffered more from the virus, especially in Europe and the US. WHO has praised the country for its strong measures to contain the virus and work proactively.
As of April 21st, Vietnam’s Ministry of Health confirmed a total of 268 cases and with no new cases reported in the past five days. 214 of the 268 cases had recovered and were discharged from hospitals as of the same date.
How has Vietnam’s economy been affected by COVID-19?
Early on, the Ministry of Planning and Investment warned that Vietnam’s economic growth rate would face a slowdown to 6.09% percent if the coronavirus pandemic is not fully contained.
Vietnam’s growth reached only 3.82% in the first quarter of the year, the worst in recent years since the first quarter of 2009, with 35,000 businesses closed. In China, more than 460,000 firms closed permanently in the first quarter by comparison, according to SCMP.
As of April 20th, the Asian Development Bank reported that Vietnam’s growth will decrease to around 4.8% in 2020 (down from 7.02% in 2019).
It’s difficult to estimate how much the economy will grow and how prices will be affected, of course, as no one knows for how long the closure of borders will stay in place.
But, many analysts predict that Vietnam will be one of the best performers in Asia, despite the crisis.
COVID-19’s Impact on Vietnam Real Estate Prices
Let’s focus on the cities where foreign investors typically buy real estate in Vietnam and how the prices have been affected.
Ho Chi Minh City
According to Jones Long LaSalle, property prices averaged at USD 2,453 in Q1 2020, a decrease of 15% compared to Q4 2019. That said, the average price in Q1 2020 was higher compared to Q1 2019.
Looking at sales volumes, the number of apartments sold in Ho Chi Minh decreased by around 50% in Q1 2020 compared to the last year. Only 1,980 units were sold which is an inevitable outcome due to the limited supply and that construction has partially stopped.
The average absorption rate, on the other hand, was only 54% of the total number of available units launched, the lowest figure for 2 years.
I believe that prices will decline further, not only in Vietnam, leaving room for foreign investors to enter the market at low price points.
Property values and transaction volumes have, not surprisingly dropped in Q1 2020. According to Vietnam Times, values have decreased by around 30% on average, compared to the same period in 2019.
To be specific, in areas measured, prices decreased from VND 40 – 45 million square meter (USD 1,724 – 1,939) to VND 30 – 32 million (USD 1,293 – 1,379). That’s not a small number and I’d say that Da Nang is one of the most interesting cities for property investments in Asia at the moment.
The city is not only a resort destination but has a diverse economy, that attracts more start-ups, global corporations, and holiday spenders.
Looking at the rental market, we’ve also seen some major changes as tenants have asked for rental reductions. The Da Nang based real estate company Dai Thang Holdings has reduced rents by 20% for its buildings in the city center.
At the same time in Ho Chi Minh City, small and medium-sized companies have required cuts of up to 25%.
Looking at the condominium market, CBRE has confirmed that the average selling price in the primary market was USD 1,365 per square meter in Q1 2020, up by 4%.
It’s hard to say how the market will perform as it mainly depends on how long the pandemic will last.
If the pandemic ends by the end of Q2 2020, Hanoi will see around 27,000 – 28,000 new units being added. In a bad scenario and if the pandemic lasts until the end of Q3 2020, the new supply and demand will be merely 30% to 40% compared to 2019.
Selling prices are expected to be reduced by around 6%, down to USD 1,300. This is mainly due to that high-end projects might delay their launches till 2021, at the same time, we’ll see reduced prices of established properties.