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Vietnam Real Estate Sector Outlook
Mid-term Outlook 2022-2024
- After two years having been affected by Covid-19 and construction licensing issues, the supply of apartments of HCMC and Hanoi was at about half the volume compared to the previous five years. However, these obstacles are being solved, and we expect the supply will rebound significantly from 2022 onwards. The uptrend will be even stronger in other small cities near the two largest cities we have mentioned.
The Long-Term Prospect of Real Estate Sector
- Real estate is one of the most popular and profitable investment channels in Vietnam. Historically, its performance has significantly outpaced. The landed property in Ho Chi Minh City (HCMC) has generated an average return of 22.9% p.a between 2013-2021 (according to CBRE Vietnam). Population density in Vietnam has grown much higher over time and will rise faster than other regional countries. Vietnam’s urban population is also expected to outpace its peers. These two factors will continue to drive up property prices.
- Vietnam’s housing prices are still more affordable than its regional peers. The property price to income ratio of Vietnam is 20.5 times in 2022, which is lower than most countries in the region. The ratios in small cities were just about half compared to HCMC and Hanoi City. Thus, houses are more affordable in small cities, and as such they offer a significant upside for real estate developers.
- The organic housing demand of Vietnam is around 400,000 units per year. However, the average annual supply is at around just 110,000 units. The gap has widened over the years due to strong economic growth, increased foreign-direct-investment (FDI), which will require more residential space for a rising workforce. On a positive note, the development of financial products and declining lending rates will facilitate housing buyers. We expect more people will be able to afford houses and there will be greater real estate transaction volumes in the future.
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