Vietnam remains one of the fastest-growing SE Asian economies with a bright long-term economic outlook. Positive GDP 2.6% growth in 2020, an average 6.7% pa forecast 2021 with full recovery by 2024, according to FocusEconomics. The prolongation of Coronavirus has challenged the recovery of economies in Vietnam.
Covid-19 outbreak has created many disruptions in Vietnam’s economy and its real estate market. Vietnam’s manufacturing sectors is heavily dependent on raw materials. Disruption to supply has forced many local producers to temporarily cease production since January, leading to a very low growth in exports in Q1 2020.
Vietnam’s economy achieved 7.02%, well exceeding set by the National Congress. High growth was driven by strong export activities 'Total export values was US$263.5 billion' leading to trade surplus US$9.9 billion. New launches in real estate market continued to decrease due to slowdown of licensing process.
The shortage of new supply was recorded again in the third quarter of 2019 in the ready-built villa and townhouse segment despite high expectation for the launch of large-scale projects. However, due to many unexpected reasons, these projects have been delayed until the end of 2019.
Amid the prevailing global high uncertainty and growth slowing down, Vietnam’s economy still achieved stable growth with 6.8% in 1H 2019. As of Q2 2019, the GDP growth reached 6.71%, slightly lower than the Q2 2018 rate yet still higher than the growth of the second quarter during the 2011-2017 period.
Looking back, there has been a contradictory scene of success and struggle among retail stories in Vietnam during the first half of 2019. Mid-end segment continues to dominate the market with new supply of around 70% - 80%, residential supply will move further away from the 10km radius of the CBD.
Due to limited supply in the 1H 2019, HCMC real estate inventory overall was absorbed. Sales momentum continued to be positive in Q2 2019 with more than 80% of new launch units having been absorbed. Office market performance with vacancy rates of both Grade A and Grade B slight decrease.
In line with the geographical diversification real estate supply emerging locations such as Ha Dong, Gia Lam, Hoai Duc and Long Bien were observed. The market has witnessed strong demand from both local and foreign investors for projects at locations close to industrial parks "The East".
Due to the impact of the delay in licensing process of new projects and the decreasing clean land bank in Ho Chi Minh City, developers concentrate on product with high value. Decreasing inventory together with limited new supply are leading to active secondary market.
According to Global Consumer Confidence Survey by Nielsen, Vietnam’s Consumer Confidence Index reached 122 points, ranked fourth in the list of the most optimistic countries in the world. This challenge is likely to continue in the coming year with limited new supply in central business district.
Leveraging opportunities from stable domestic demand and increasing foreign interest, especially in HCMC and Hanoi is rising due to high pace of urbanisation. Additionally, the steady growth of population average 2% per annum each city as seen over the past five years will drive constant housing demand.
Vietnam’s two largest metropolitan areas expect to welcome a wave of new supply, of mostly Grade B offices, in 2019. The expected supply growth in 2019 of 13% and 11% in HCMC and Hanoi, respectively, will shake the office market for the first time after a quiet period.