Vietnam opened up to foreign property investors as late as 2015 and has experienced fast growth since. Buyers from Hong Kong, Mainland China, Singapore, and Korea in particular, see Vietnam as a lucrative market with high ROIs.
Unfortunately, the market was hit by the COVID-19 pandemic in 2020 and 2021, we saw prices and rents fall by double digits.
Many investors are eager to understand what the predictions are for the market in 2022. As borders start to open, real estate buyers can resume traveling and visit Vietnam, which is crucial.
In this article, we explain how the market has performed in previous years and our predictions for 2022.
Topics covered:
- Vietnam’s Real Estate Market in Previous Years?
- Foreign Property Ownership Regulations & Changes
- Vietnam’s Economic Growth
- The Real Estate Market in Ho Chi Minh City
- The Real Estate Market in Hanoi
- How will Vietnam’s real estate market perform in 2022?
- What will drive the real estate market in 2022 and beyond?
Vietnam’s Real Estate Market in Previous Years
Vietnam’s property market has emerged as one of the fastest-growing in Southeast Asia. Suffering from a housing bust in 2009, the market recovered in 2013 and has seen constant and fast growth since.
The reasons why investors have opened their eyes to Vietnam’s property market are:
- It has one of the fastest-growing economies in Asia
- Eased foreign ownership regulations since 2015
- Increased manufacturing and a booming tourism
- Rising interest among foreign buyers
- Preferable demographics and a growing population
- Comparably inexpensive property to other major cities in the region
Vietnam has been growing by well over 6% annually since the 2000s. At the same time, the GDP per capita has increased almost sixfold, from USD 390 in 2000 to around USD 2,264 in 2018.
The quick surge in individual wealth has made property affordable for many Vietnamese people, resulting in an increase in new developments and a boost in property prices.
According to a report from the World Bank, 70% of Vietnam’s population is considered economically secure. This is a rise of 20% since 2011.
Besides, around 1.5 million Vietnamese people join the global middle class every year. This quick rise in a country with a 95 million population will inevitably increase the demand for real estate in the coming years.
Foreign Property Ownership Regulations and Laws
Vietnam has introduced major policy changes and new laws in 2015, resulting in plenty of benefits for overseas buyers.
Below is a summary:
- Housing Law and Law on Real Estate Business (Introduced in 2015)
- Law on Sell and Transfer of Real Properties (Introduced in 2015)
These laws made it easier for foreigners to buy property as:
- Foreigners can buy property by simply having a tourist visa
- There’s no cap to the number of properties you can buy (previously you could only buy one property)
- Foreigners can still only buy a maximum of 30% of the units in condominium projects. Besides, we cannot own more than 10% of the properties in a landed project
- Foreigners can buy houses, but only 250 of the houses in a given ward (division)
- The leasehold period is still 50 years but can be renewed. The government has considered increasing the lease up to 99 years in special economic zones. Regulations will most likely become less strict in the future
Worth mentioning is that the changes also made it possible for 4 million overseas Vietnamese to buy an unlimited number of properties.
Vietnam’s Economic Growth Fuels Investments
As mentioned, Vietnam’s economy is one of the fastest-growing in the world, which has positively affected the real estate market.
- In 2018, the economic growth peaked at 7.1%, and the economy grew by around 7% from 2019 to 2020, according to the World Bank
- The economy has performed comparably well in 2020, despite the COVID-19 pandemic. Unfortunately, the country suffered due to the COVID pandemic from April 2021, as of late November 2021 the expected economic growth is set to 2.3%
- The slight dip in its GDP growth has mainly been led by weaker external demand and the continued tightening of credit and fiscal policies
- The number of foreign visitors to Vietnam was nearly 7.3 million in the first five-month of 2019, up 8.8% against the same period in 2018, according to the General Statistics Office (GSO)
Bigger cities and coastal cities like Ho Chi Minh City, Da Nang, and Hanoi have benefited most of these changes and fast development and will continue to do so for years to come.
The Real Estate Market in Ho Chi Minh City
In Q2 2019, the average price for apartments was USD 2,009 per square meter in Ho Chi Minh, an increase of 21.6% compared to 2018.
The average price for high-end property rose as much as 52.9% to USD 4,569 per square meter. This great increase in prime real estate prices in the central area is mainly due to the launch of new luxury projects and the scarcity of land.
The average price per square meter in Ho Chi Minh City has been 18% of that in Singapore, and only 14% of the average price per square meter in Hong Kong. Luxury real estate prices in Ho Chi Minh City are merely 8% of those in Hong Kong on average, which speaks for itself.
In 2019, we also saw a decrease in new projects due to the lengthened construction approval processes, which is a result of the government’s tightened control of new developments.
As a result, many investors have started to look for quality units in the secondary market as well.
In the coming years, District 2 and District 9 will become increasingly interesting as the city mainly expands to the east. Most of the new office supply will be allocated to these districts until 2025.
How was Ho Chi Minh’s real estate market affected by the COVID-19 pandemic?
Real estate prices and particularly rents dropped much during the COVID pandemic, which has pushed developers and agents to the limit.
With restrictions on traveling, agents have been forced to focus primarily on local buyers due to the limited number of foreigners that have remained.
In the first half of 2020, transactions dropped by as much as 55% compared to the year before, equaling a number of 6,800 real estate products traded.
Despite the downturn, there are deals to be made in the market for those who work with experienced and credible partners with boots on the ground.
We’ve seen a particularly high demand for distressed luxury units that can fetch prices that are 20% lower than usual.
The Real Estate Market in Hanoi
Hanoi gets more attention and mainly due to escalating real estate prices and a limited supply in Ho Chi Minh.
The amount of foreign direct investments (FDI) is high. Having said that, the supply of new properties was low throughout 2019, and the price increased far beyond those of Ho Chi Minh.
Even if the average sales price of apartments were USD 1,417 and almost 30% lower than that of Ho Chi Minh, the year-on-year price grew “modestly” at 6.9%.
Compare that to Ho Chi Minh which saw year-on-year price growth of 21.6%.
Looking at upcoming areas in Hanoi, many new projects will be built in the Western areas of Hanoi (Yen Hoa and Trung Hoa) as the central areas become crowded and the government plans to relocate government offices.
How will Vietnam’s real estate market perform in 2022?
The residential real estate market has been tumbling throughout 2020-2021.
Of course, it’s hard to share any clear predictions as we don’t know for how long borders will remain closed. It’s crucial that businesses and private investors alike can visit the country prior to making investments.
Looking at the industrial real estate market, the southern region saw prices surging throughout 2021-2022 as increasingly more companies move production here.
Thanks to lower labor costs and a trade war between the US and China, multinationals around the globe want to diversify.
According to Cushman & Wakefield, Ho Chi Minh’s industrial rents grew by 9.0% in 2019 and by 10.6% in 2020, which is impressive considering a global pandemic.
It’s evident that companies still believe in Vietnam and the domestic market which spurs demand and drives prices upwards.
Worth mentioning is also that Ho Chi Minh City accounts for 20%-25% of the GDP output in Vietnam. Thus, many analysts and buyers primarily focus on the market when discussing real estate.
Looking at apartment prices, prices have increased rapidly and grew by an astonishing 90% from 2017 to 2020, including by 12.8% in 2020 alone.
Notably, the increase is a result of both a local and foreign demand, something we don’t see in countries like Cambodia.
While it will take at least 1-2 more years for the market to recover, investing in Vietnam real estate is a long-term bet that will pay of for many.
Called “The New Guangdong” as it has a similar growth trajectory and population, countries such as Cambodia and Thailand are far less interesting to many.
What will drive Vietnam’s real estate market in 2021 and beyond?
Below I’ve listed some of the main reasons why the Vietnam real estate market will most likely continue to grow in the coming years.
1. Economic Growth
Vietnam has outperformed most of its neighbors and the economic growth hovers at around 7%.
Worth mentioning is that the country was impacted less than its neighbors, showing an estimated growth of 2% despite suffering from the pandemic. The government also targets growth of around 6.5% in 2021.
The Asian Development Bank (ADB), on the other hand, previously estimated that Vietnam’s GDP growth will reach 4.1% in 2020.
As 1.5 to 2 million Vietnamese people join the global middle-class every year according to The Boston Consulting Group.
This contributes to stronger demand for real estate, as proved by the increase of home loans in 2017 and 2018.
A report by RNCOS points out a deficiency of housing in Vietnam with 70% of the population not living in their own homes. The report claims that Vietnam needs 20 million housing units to meet the demand.
There’s currently a high demand for affordable houses and the demand is outpacing the supply in the low-end market. On the other hand, the high-end market has a slightly higher supply-to-demand, as most developers focus on high-end projects only.
2. Demographics
Vietnam has one of the most preferable demographics in the region with a population of around 95 million where 50% are aged below 35. At the same time, the population grows steadily and will reach 120 million by 2050.
Countries like Japan, on the other hand, faces problems with a declining population that might be halved by 2100.
3. Urbanization
Only 17% of Vietnam’s population lives in Hanoi and Ho Chi Minh, but people quickly urbanize from rural areas and smaller cities.
Having the fastest urbanization rate in ASEAN, Vietnam’s real estate market will continue to grow in the long-term.
4. Foreign Investment
Vietnam attracts many foreign investors, which is not strange, as the average house prices are significantly lower compared to Hong Kong, Korea, Japan, Singapore, and major cities in Mainland China.
For example, a luxury apartment in a prime location in HCMC costs around USD 5,000 per square meter, while the same apartment can cost four times more in Singapore and Hong Kong.
As foreigners can easily buy property with a renewable leasehold period of 50 years, there’s been a sharp rise of overseas investors. For the first quarter of 2018, there was a 300% increase in the demand from Chinese buyers compared to the first quarter of 2017.
You’ll also notice the sharp increase of expats. There are currently 7-8 times more expats compared to 2008 where most come from China (31%), followed by South Korea, Taiwan, and Japan.
5. Tourism & Growth in Coastal Cities
The tourism industry thrives in Vietnam, but is not as developed and mature compared to Thailand, for example.
Vietnam is set to compete with countries like the Philippines and Thailand, and still, has plenty of room for growth. Coastal cities are the primary destinations as Vietnam has a shoreline spanning almost 3,260 kilometers.
In the past years, Vietnam’s government has invested much money in infrastructure, especially in coastal cities like Nha Trang, Mui Ne, Ho Tram, Quang Nam, Phu Quoc, and Danang.
Improved infrastructure and a rapid increase of tourists and retirees have made these places more lucrative for investments in second homes and vacation homes.
Where should I buy property in Vietnam?
All the major cities have seen steady price increases in the past years.
Ho Chi Minh City is the best performer as it serves as the commercial hub, but coastal cities like Da Nang and Nha Trang quickly turn into popular destinations. These cities have beautiful nature, beaches, and a more relaxed atmosphere.
Hanoi also gets more attention as the capital receives much foreign investment and offers high yields, at the same time as prices are lower compared to Ho Chi Minh.
Many government offices and foreign embassies are located here, but you’ll also find many manufacturing companies that set up operations in Hanoi and surrounding cities.
Conclusion
Vietnam’s residential property market was affected badly throughout 2020 and 2021, due to the pandemic.
It will most likely take another 1-2 years before we see a recovery in the market, looking at 2023-2024.
Despite a weak residential property market, the industrial real estate market has thrived throughout both 2020-2021.
Vietnam becomes increasingly interesting for manufacturing companies as they seek to diversify production from China. Lucrative Free Trade Agreements between Vietnam and other countries/unions also spur the demand.
The increased demand for property from domestic buyers who urbanize and get higher disposable incomes is also a main driver. Here, locals, as well as foreigners, invest in real estate.
With a population of 95 million where 50% are aged below 35. The country also faces a deficit of housing units, creating a bigger demand for low-end as well as high-end residential units.
The relaxed regulations towards foreigners, along with comparatively low property prices, make Vietnam a preferred location among foreign buyers. Especially from Hong Kong, Mainland China, Korea, and Singapore.
As more international developers enter the market, we’ll see an increased supply, along with increased demand. The record-breaking increase of foreign tourists, as well as an increase in FDI and new office space, will fuel the increase of commercial property.
With that said, Vietnam is still one of the most interesting countries to buy real estate in Asia in 2020.
[…] 2015, it was difficult for foreigners to buy and profit from Vietnam’s real estate market. You were only allowed to own one condo unit, for self dwelling […]