The year 2022 is expected to mark a turning point for the real estate market, which is projected to move from a state of doom to recovery thanks to supporting policies, including public investment and economic packages. The Saigon Times spoke to Mr. David Jackson, CEO of Colliers Vietnam, about his thoughts on the outlook for the property market this year. Excerpts:
The Saigon Times: Covid-19 has turned everything in society and the economy upside down. As a guru in the real estate sector, can you tell us how the pandemic has affected the property market?
Mr. David Jackson: The year 2021 saw many strong fluctuations in the real estate market. This can be seen as a picture with a dominant gray color. But there are still bright spots that make us pin all our hopes on 2022.
Speaking about the gray color of the market, the most obvious problem is the impact of the Covid-19 pandemic on the development and sales plans of developers. This makes the market, which already has a limited supply, even more deficient, leading to an imbalance between supply and demand.
In particular, the affordable real estate segment is still absent. Along with that, land fever has occurred in many localities in the first months of 2021, causing market turmoil and affecting investor confidence. Fortunately, authorities and localities quickly issued warnings and planning information to stabilize the situation.
How about the bright spots?
The market had some bright spots in 2021. The first was the strong and stable growth of the industrial real estate segment, with a slight increase in rents and occupancy rates across the country reaching above 70% thanks to significant FDI capital poured into Vietnam. Accompanying that was commercial real estate, including office and retail.
The actual rental price did not decrease compared to before the pandemic. The occupancy rate was slightly affected but quickly recovered in the second half of 2021, thanks to the need to move and set up new offices among foreign businesses in Vietnam.
An important factor is that a series of legal support policies for the market have been introduced, such as the revised Construction Law 2020, the revised Investment Law, Resolution 164, Decree 148/2020/ND-CP, Decree 25/2020/ND-CP, as well as a series of circulars of the Ministry of Construction. These support policies will help ease market bottlenecks, smoothen the project approval process and solve problems in many projects.
The remarkable point is the strong development of periphery markets in the context that urban land is scarce. While the markets of HCMC and Hanoi have a shortage in supply, neighboring localities such as Binh Duong, Dong Nai, Ba Ria – Vung Tau, Haiphong, Hung Yen have emerged with a series of new projects, including apartments, townhouses or land plots.
A strong trend is that the resort real estate segment is still popular among investors despite the outbreak of the pandemic. Investors have great faith in the strong growth of the tourism industry after the pandemic, which has been suppressed for more than two years. Investors are also very active in developing quality products such as beach villas, condotels and attractive sales programs with high profits.
Finally, there is the appearance of luxury real estate in the market, specifically for the super-rich group. This helps increase the real estate value in “golden” locations and brings Vietnam closer to some countries with more mature real estate markets in the region.
What are the challenges and opportunities awaiting property developers in 2022?
Real estate demand, especially in the industrial and residential real estate segments, will continue to maintain its upward momentum due to the driving force of FDI inflows, as well as the Government’s efforts to disburse public investment capital in 2022.
For HCMC, I think the supply in 2022 will improve, with many new projects of domestic and foreign developers compared to 2021. However, due to the scarcity of land in the inner city, new projects in the mid-end segment will mainly focus on the East and suburban districts. The central land fund will be prioritized for the development of luxury and high-class housing projects.
Housing prices are expected to maintain an average growth momentum of 3-7% in 2022 across segments. For homebuyers, the real estate selection criteria will also change after what they have been through during the pandemic. Accordingly, products with high-class utilities, open living spaces and those connected with nature will be popular.
Meanwhile, in Hanoi, an abundant new supply will come from large urban projects from suburban areas thanks to a large land bank. The strength of the Hanoi housing market lies in its strongly developed infrastructure system, increasing the connection between the central and surrounding areas.
Real estate prices in Hanoi are not as volatile as in HCMC, but prices still increase year on year at 1-3%. Therefore, with the abundant supply in 2022 and a large demand for houses among people, housing prices in Hanoi will increase slightly in 2022 compared to 2021.
How about foreign investors? Do they still look for opportunities to enter the local market, especially after seeing the surprise land auction in Thu Thiem?
There are many reasons foreign investors continue to view Vietnam as an attractive place to invest.
Vietnam’s real estate market has many factors that help us believe in strong growth in the coming time. The GDP in 2021 increased by 2.58% over the previous year. In 2022, the economic growth rate could reach 6.5-7%.
In addition, the Government of Vietnam is still focusing on infrastructure development, promoting public investment strongly in the coming time. In the period of 2021-2025, the total public investment capital is VND2.87 quadrillion, expected to reach 95% disbursement, higher than 75% in the 2016-2020 period. This is a huge motivation for the real estate market.
Regarding the legal environment, in 2022, the Government is expected to submit to the National Assembly an amendment to four laws—the Law on Housing, the Law on Real Estate Business, the Law on Land and the Law on Construction.
Specifically, the group of related decrees guiding the revised Construction Law includes Decrees 06, 09 and 10, to remove many obstacles in the construction investment project management. There is also the group of decrees detailing the Law on Housing, including Decrees 30 and 69. Never before has a series of laws and policies been studied and amended so quickly in such a short time.
However, the scarce land bank and the obstacles in legal procedures are still major problems for real estate developers. Besides, although we believe the Covid-19 pandemic will be controlled, I still think we should not be too optimistic, as that leads to a lack of caution.
Developers and investors should also have plans to help minimize risks if the pandemic becomes complicated again.
Which segment will attract investors the most? How do you foresee the real estate market in 2022?
In the context of a complicated pandemic, industrial real estate in 2021 remained vibrant. It is the brightest segment compared to other segments in the real estate market. New industrial parks have been planned or built throughout the north, central and south provinces to meet this demand. That led to a boom in the industrial real estate market in the past time despite the pandemic.
Besides, with the strong growth momentum of e-commerce, factory and warehouse services and logistics services are also very promising.
Social distancing has brought a drastic change in Vietnamese’s consumption habits in using e-commerce services. According to data from the iPrice Group and SimilarWeb, the total number of visits to the top 50 Vietnamese e-commerce websites in the first six months of 2021 reached more than 1.3 billion, the highest ever.
However, the Vietnamese market still has many issues it needs to overcome to increase its competitiveness compared to other regional markets, such as the infrastructure system, logistics costs, administrative procedures, regulations and laws. If these issues are resolved, the Vietnamese market will attract major investors.
