While 2020 is believed to have changed the real estate industry, trends in the sector this year are forecast to sustain or be aligned with demand in the market.
Hanoi – While 2020 is believed to have changed the real estate industry, trends in the sector this year are forecast to sustain or be aligned with demand in the market.
Trang Bui, a senior director at JLL Vietnam, said one of the five main trends in 2021 is “city in the city” and “integrated real estate”, which are popular in large-scale projects.
Vietnam’s property market is becoming more mature, with buyers increasingly interested in a healthy and sustainable living environment rather than simply a place to live.
To attract buyers, developers are, therefore, building residential areas with a range of facilities to help future residents steer clear of problems caused by rapid urbanisation and outdated public infrastructure.
A plus in any large-scale project is the ability to provide different types of housing for many potential groups of buyers, Trang said.
The second trend is the result of a shift to working from home, fuelled by the COVID-19 pandemic, which has changed the face of office property.
Country Director of JLL Vietnam Paul Fisher said the trial of work-from-home policy around the world has shown that technology will continue to be helpful to businesses’ operations.
The lack of direct contact has inadvertently created more working pressure, so some people still want to apply a flexible working approach in the future. However, he noted, offices will still be the centre of business activities.
According to JLL specialists, another trend is the growth of logistics and storage infrastructure, driven by e-commerce.
They noted that Vietnam is now one of the fastest-growing e-commerce markets in Southeast Asia. Amid the pandemic, more and more consumers have opted to shop online, raising demand for cold storage warehousing for food and other essential goods.
E-commerce needs storage space three times larger than that of traditional logistics activities, which also helps boost demand for industrial real estate around the world.
Businesses’ shift to “green” and sustainable activities will be the fourth trend leading the property market in 2021, JLL noted, adding that buildings with high ESG (environmental, social, and governance) ratings may see their rentals rise by up to 33 percent compared to those without similar “green” certification.
Specialists also expect the property sector to play an important role in creating a less polluted environment, to help society build a sustainable future.
The fifth trend in the market will be investors’ increased attention on the healthcare sector amid the pandemic crisis.
Both domestic and foreign investors have targeted healthcare logistics, and they will need more refrigerated warehouses near their clients to meet the rising demand for temperature-sensitive products like cosmetics, food, medicine, and, especially, COVID-19 vaccines and other vaccines in the future, JLL predicted.
Limited land and slow approval procedures are causing a fall in real estate supply in the country’s major cities, with developers instead flocking to satellite cities both north and south.
On January 10, more than 1,000 buyers participated in the launch ceremony of Bien Hoa Universe Complex, located in Bien Hoa city of Dong Nai province. And just a few weeks previously, more than 600 villas and detached houses in the first phase of the Waterpoint project from Nam Long Corporation in Long An province were handed over to customers.
Minh Hoang, an investor in Hanoi, told VIR that profit potential in cities like Hanoi and Ho Chi Minh City is not as high as before, and so other provinces like Dong Nai and Long An are getting in on the real estate action.
“Moving to satellite cities would be a good choice for many private investors. This field of investment is now at the beginning step and the room for growth remains very strong,” Hoang said.
Angus Liew, general director of Gamuda Land in Ho Chi Minh City, expressed that land funds inside the city has been limited, especial for areas large enough to set up townships. “We now have to work with some companies to try and find new land suitable for us to develop a township,” Liew said.
Improvements in the infrastructure system are also helping satellite and neighbouring towns increase their attraction for major property developments.
“We are considering neighbouring and satellite provinces such as Binh Duong, Dong Nai, and Long An in the south; and Hung Yen, Haiphong, and Phu Tho in the north. All of those are offering very good opportunities for large-scale real estate projects,” Liew said.
Domestic developers meanwhile have already jumped into the game. Phu Dong Group is preparing to launch a range of projects. First is Phu Gia Residences located in the heart of Nhon Trach district in Dong Nai. This project will offer more than 260 products to the market in the first quarter of this year.
In Long An province, Thang Loi Group has just open for sale its Sol City in Can Giuoc district, located over a space of 130 hectares. Long An is also the location of many other projects such as Long Cang Riverpark, invested in by Phuc Land Real Estate Company, and West Lakes Golf & Villas, funded by Tran Anh Group.
Along with that, large-scale developers such as Novaland, Van Phuc Group, Dat Xanh Group, and Phat Dat Corporation have already been investing in satellite cities for some time.
In 2020, the real estate market in Ho Chi Minh City and Hanoi experienced a difficult period due to the impact of the COVID-19 pandemic, in addition with increasing land prices and slow approval processes for projects by local authorities.
Based on current conditions, experts said that the real estate market in neighbouring provinces of Ho Chi Minh City will rise, becoming a stronger investment attraction in the coming years.
According to economist Le Ba Chi Nhan, the improvement of infrastructure between Ho Chi Minh City and neighbouring provinces in recent years has greatly helped developers explore new options.
“Setting up real estate projects in satellite cities will create competitive products for a market which is in serious lack of supply and push up the growth of the whole area,” Nhan said.
From the perspective of buyers, living in modern urban areas of satellite cities is also becoming a trend – somewhere they can improve their living standards with much better environments and more agreeable population densities.
Dang Hung Vo, former Deputy Minister of Natural Resources and the Environment, acknowledged that the trend of investing in real estate projects in satellite cities and provinces is a given. “Once inner-city land funds become unavailable, it is inevitable that real estate developers move to the surrounding areas. As for end-users, when infrastructure develops and roads are convenient, living in neighbouring urban areas is a very good choice,” Vo said.
According to an expert from domestic property website batdongsan.com.vn, buyers and investors are paying much interest to the six northern cities and provinces of Quang Ninh, Haiphong, Bac Ninh, Hoa Binh, Hung Yen, and Vinh Phuc. In the south, seven provinces are most hunted in particular – Binh Duong, Dong Nai, Ba Ria-Vung Tau, Long An, Binh Phuoc, Can Tho, and Kien Giang.
Among those, Binh Duong is the hottest destination as its population shot up 200 per cent over the last decade, the highest percentage in Vietnam. Figures show that around 44 per cent of local residents in Binh Duong lease homes and do not own a private home.
However, not every market is a safe destination as more and more developers enter. Poorly-planned development could bring oversupply and those destinations could become “death projects” if they cannot attract residences to live in.
According to Nguyen Tran Nam, chairman of the Vietnam Real Estate Association, to make those projects become fruitful, developers must know how to attract residents to come and live in them.
“In order to do that, developers must create enough facilities and a good infrastructure system then residents would come. They must not make many promises to buyers which they later fail to meet,” Nam said.
Moreover, developers are advised to get to grips with the special advantages each province can offer.
“Coastal provinces always have more advantages thanks to natural incentives to develop tourism, while delta provinces with good a infrastructure system would be reserved for the second-home segment. Industrial development hubs meanwhile should be reserved for developing mid- and lower-end houses for workers,” Nam said.
He also warned that buyers should think twice about a new development model known as a “farmstay”, which has appeared in satellite provinces in recent years. “Land for farmstays is all agriculture land, which can be used only for farming. If buyers invest in this model, their capital investment would be kept for long time and they would face difficulties when investments cannot be recycled,” Nam added. ( source: vir.com.vn)
The number of high-end apartments remaining unsold in HCMC soared by 74 percent year-on-year in the last quarter of 2020 as demand slumped.
Only 5,007 were sold in the quarter, according to real estate consultancy CBRE. Nearly 6,700 units at six projects had entered the market in the period. Overall new apartment supply topped 17,200 units.
The high-end segment, with prices of $2,000-4,000 per square meter, accounted for 76 percent of the country’s total apartment supply.
According to the Ho Chi Minh City Real Estate Association (HoREA), the oversupply of high-end apartments is causing concern by making the real estate market unsustainable.
According to its chairman, Le Hoang Chau, some developers registered their projects with the Department of Construction with low prices but later hiked them to high-end levels to increase their profits.
The excessive supply of high-end apartments and a dearth of affordable ones has affected low- and middle-income people.
Besides, over 60 percent of high-end apartments are bought by speculators, which is threatening the sustainable development of the housing market, HoREA said. (source: vnexpress.net)
Hanoi – Housing projects not located in any urban districts, except Hanoi and HCM City, are permitted to sell land lots.
A land lot in Da Nang. Housing projects are proposed to sell land lots. – Photo diendandatdai.com
This is the regulation proposed at the end of May by the Ministry of Natural Resources and Environment in the latest version of the draft amending and supplementing Decree 43 on specific regulations for a number of articles in the Land Law, including conditions for transferring land use rights at housing projects.
According to the April version of the amended draft, the housing projects nationwide are not allowed to sell land lots.
Real estate experts said the ban of selling land lots would have strong impact on the domestic real estate market and it is very difficult to implement this ban.
Nguyen Tran Nam, chairman of the Vietnam Real Estate Association said the proposal on banning the sale of land lots is not suitable with both legal and practical issues, causing many difficulties for businesses and the people.
The ministry has the ban with good target of stopping illegal actions in trading land lots to cheat buyers over past time, Nam said. The fault is real estate market management of local authorities but not due to the regulations.
Nam said the market has high demand on trading land lots for investment while the State could collect tax from transferring land use right.
The problems on the land lot market at present included not close management for the market of the authorities and intransparent information about planning of housing projects in particular and the property market in general, he said.
Le Xuan Nghia said most of Vietnamese real estate enterprises are small and medium sized ones with limited financial capacity so they have often had land lot projects to recover capital quickly, ensuring cash flow to develop new larger projects.
Nghĩa said giving approval for selling land lots should depend on each housing project and each location because the general construction planning at present is not synchronised.
Trần Kim Chung, deputy director of the Central Institute for Economic Management, said the market still has demand on trading of land lots so the State should not ban this activity.
The permission of selling land lots is a policy decision and the issuance of this decision should be suitable with the practice.
After a brief hiatus, property companies have been resuming sales of developments and revealing their post-COVID-19 business plans since the beginning of May.
The property market would see increased competition in the post-pandemic period, experts said. (Photo: novaland.com.vn)
Ministry of Construction data shows that some 80 percent of developers stopped sales or even temporarily halted operations during the first quarter while the rest had modest operations going.
Transactions slumped to 40 percent of the level seen in the same period of 2019. Only 14 percent of products entering the market during the quarter were sold, the lowest level in four years.
But the industry is now gearing to tap opportunities during the post-pandemic recovery, which is expected soon.
In early May, Vinhomes Company, a subsidiary of VinGroup, Vietnam’s largest private firm by market value, opened sales of S1.08 apartment tower at Vinhomes Ocean Park in Hanoi’s Gia Lam district.
For the first time a real estate sales event included livestreaming and online transactions.
In just over an hour nearly 250 apartments, or 50 percent of the total number of units on offer, were sold.
The Novaland Group began the sale of Aqua City in Dong Nai province’s Bien Hoa city. The 1,800ha project, mainly comprised of villas, is thought to be the largest property project in the province.
The Hung Thinh Corp plans to begin sale of its 96ha project in Binh Duong province’s Di An city in the third quarter.
It will have 3,000 housing, 12 officetel and 53 shophouse units.
According to experts, the real estate market is set to undergo a rejuvenation process as a result of the Covid-19 pandemic and awaits a new growth cycle.
It would be a difficult time for weak companies, but for those with deep pockets and professionalism, the pandemic would only pose short-term problems but could end up creating new opportunities, they said.
Tran Le Thanh Hien, chairman of the Danh Viet Group, said the difficulties of the real estate market are temporary and in the long term has significant potential for development.
It is time for property companies to expand their land ownership, especially those with strong finances.
Novaland Group now has 5,000ha of land with a portfolio of more than 40 real estate projects in HCM City and neighbouring provinces over the next few years.
Nguyen Van Hau, general director of Asian Holding, said property firms must improve their resilience and flexibility to cope with market shocks.
Although there are difficulties, the market shows positive signs, he said.
Experts said if the disease situation remains under control, the market would become active again in the last two quarters with the introduction of large new projects and diverse products that meet customers’ needs.
More transparent and compatible factors from the Vietnamese government and investors are key requirements to attract further funding from the international arena into the country’s real estate market.
Legal frameworks must be improved so the right investment appears, Photo: Le Toan
According to Nguyen Thi Thanh Huong, CEO of Dai Phuc Land, foreign investors are highly appreciated in the Vietnamese real estate market, especially if they have a long-term vision. However, the compatibility between groups inside and outside the country must be improved. This refers to the gaps between the legal framework, corporate government, and the types of products which developers are looking for.
Up until now, the Vietnamese legal system has been tangled in uncertainty across several issues, such as for condotels, tourism property, and for entertainment and leisure facilities. Moreover, foreign investors also pay the most interest to the capacity to manage the developers, as well as the type of projects which they plan to invest in.
“Vietnamese developers must seriously prepare a mindset and mentality and improve themselves towards international standards to be equal to foreign investors, so that we can successfully co-operate with them,” Huong said.
Dai Phuc Land is now developing a large-scale project called Van Phuc City. The developer has also recently successfully inked a contract with South Korean Daemyung Group to co-develop the $300-million Ocean World as part of Van Phuc City. “In order to fulfil this contract, we must upgrade ourselves to meet the demand of the foreign partner,” Huong said.
Meanwhile, according to Hong Sun, vice chairman at the Korea Chamber of Commerce and Industry in Vietnam, South Korean investors often have difficulties in accessing information on the Vietnamese partners with whom they plan to co-operate.
“Vietnamese partners must clarify their business status, along with advantages and disadvantages, so foreign investors can make the right decision,” Sun said.
Many deals have failed due to a lack of transparency. For example, domestic and foreign partners in a joint venture to develop a $140 million complex with horse track ended up in court due to a dispute that lasted over the last 12 years. The 500-hectare project is located in the southern province of Long An and invested by Ho Chi Minh City-based Hong Phat Real Estate JSC and China Policy Ltd. (CPL).
The Chinese company had made contributions of $15.6 million for its part. However, due to the extra expenses for compensation, the domestic partner requested CPL to contribute another $20 million, which was refused. Now in court, the joint venture is on the edge of bankruptcy.
Meanwhile, the unclear regulations on paying tax has also put a halt to a $4.1 billion tourism complex, Saigon Atlantis, through US Winvest Investment LLC, which has also dragged on for more than a decade.
In 2007, Winvest had advanced an amount of VND98 billion ($4.5 million) of the land rent to the southern province of Ba Ria-Vung Tau for land clearance and compensation of 87 hectares out of the total of 307ha. However, in 2012 this piece of land was handed over to the investor.
Following Decree No.69/2009/ND-CP, investors must pay land rental at the time of land allocation. With this regulation, the actual rent at the time of land allocation to the investor in 2012 had increased five times higher compared to 2007. Winvest, therefore, requested to pay the rates of 2007 but was refused by the local authorities. The authorities decided to revoke the project and add it to the list calling on other investors to develop in the coming time.
Although strongly impacted by the coronavirus, slowing down real estate development in Vietnam, interest from foreign investors remains high.
According to Eric Solberg, chairman and CEO of EXS Capital, a Hong Kong-based independent investment firm with interest in high-end residential projects in Vietnam, the pandemic has devastated the real estate market but it is not all negative for some sectors.
“Segments which still remain on the increase despite the pandemic are logistics, industrial property, and data centres,” Solberg told VIR.
He added that EXS Capital is working with local partners to locate sites with land and power to build the next generation of Vietnam’s digital economy. “With e-commerce, video meetings, and entertainment streaming all going through the roof, the cloud is ever more important and, as we say, data centres are where the cloud lives. So that looks very promising,” he said.
Solberg added, “For brave, smart investors, these situations are the very best time to invest, of course with a strong and honourable local partner.”
Meanwhile Don Lam, VinaCapital co-founder and CEO, said that some real estate development projects in Vietnam are being held up by challenging issues, but VinaCapital believes that the development of many other projects that are not encumbered by such intractable issues should be allowed to progress right away.
“Before the COVID-19 outbreak, the pent-up demand of middle-class homebuyers, coupled with the dearth of new projects, led to a situation in which newly-launched units were typically receiving multiple bids on each unit for sale. In our opinion, that is a clear signal that more units need to be developed and launched for sale,” Lam said.
VinaCapital expects more manufacturers to expand or locate operations to Vietnam, an acceleration of a trend that has already brought significant levels of investment. “Vietnam continues to offer tremendous opportunities for investors who know how to identify and access them and avoid pitfalls,” Lam said.
The recent green light for Ho Chi Minh City People’s Committee to set up an innovative hub in the east would make the so-called Vietnam Silicon Valley come to life and attract further investment into the city’s real estate market.
The government wants Vietnam, in particular Ho Chi Minh City, to transform towards innovative hub status, Photo: Le Toan
The proposed innovative city is expected to combine research and development centres, human resources training, and application of science and technology.
The creation of this creative city is based on the idea of building a hi-tech and smart urban development zone for Ho Chi Minh City, the southern key economic region of the whole country, and for neighbouring regions.
The initiative, according to Ho Chi Minh City Party Secretary Nguyen Thien Nhan, will aid momentum to boost the economy of the whole region for the next decade, and is expected to contribute 30 per cent of Ho Chi Minh City’s GDP, while becoming the nucleus of Industry 4.0 in Vietnam and deploying a smart urban hub.
According to designs proposed by Sasaki-enCity, this innovative hub will cover districts 2, 9, and Thu Duc.
Thu Duc district already has a high concentration of institutes, research centres, and four large universities with more than 10,000 lecturers, including more than 1,000 professors and doctors and 100,000 students.
District 2 is home to Thu Thiem New Urban Development Area – the second economic hub of Ho Chi Minh City and soon to become the new international financial centre of the city and the wider region.
Singaporean developer Keppel Land is also developing the Saigon Sports City venture in this district, which is applying innovative urban solutions including smart security and mobility, and environmental infrastructure solutions.
Meanwhile District 9 boasts Saigon Hi-tech Park, the second-largest such park in the country, covering more than 700 hectares and a base for 35,000 labourers. The park, with a total of $6 billion investment capital, is also home for Intel Products Vietnam – a leading overseas high-tech investor in the country.
Recently the east has become a new heart for Ho Chi Minh City with many large-scale infrastructure projects, from existing schemes such as Hanoi Expressway, Ho Chi Minh City-Long Thanh-Dau Giay, Metroline 1, the second ring road, and Mai Chi Tho Boulevard either under construction or in the pipeline.
Ho Chi Minh City People’s Committee said that approximately 70 per cent of the investment capital of the whole city for the last 10 years was allocated to the east, with 216 projects and the total investment capital of VND350 trillion ($12 billion).
In addition to that has been creation of a transport system to connect the area with neighbouring provinces, including ring roads 2 and 3 and various bridges to offer deeper connections.
In the neighbouring province of Dong Nai, the existing Ho Chi Minh City-Long Thanh-Dau Giay Expressway has also seen proposals to expand it into double lanes. This type of expressway would not only break through the traffic flow to the incoming Long Thanh International Airport but also reduce congestion from the west to city’s heart.
According to Nguyen Dinh Trung, chairman of Hung Thinh Corporation, the east of Ho Chi Minh City has become a golden location attracting real estate developers to meet the increasing demand of local residents. “This opportunity is open for all, from domestic and international investors to other local people,” Trung said.
Real estate prices in the east of Ho Chi Minh City have been increasing in recent years, especially in districts 2 and 9 where a doubling in price has been seen in the last two years alone.
Many other projects in this area are attracting interest from both investors and buyers, such as the Senturia Central Point project located next to Saigon Hi-tech Park in District 9, and the Vinhomes Grand Park where prices are continuing to rise.
In addition, land costs in the east’s neighbouring areas such as Nhon Trach and Bien Hoa city also increased by up to double compared to quotes from two years ago, up to approximately VND100 million ($4,300) per square metre in central areas.
Impacted by limited new supply, the number of apartments for sale in Ho Chi Minh City was down 42 per cent in the first quarter of this year compared to the same period of last year, hitting the lowest level in the past five years.
The low point in apartment prices in Ho Chi Minh City offers good opportunities for cash-rich buyers and investors (Photo: Le Toan)
According to Savills Vietnam, only three new projects opened bookings before Tet and were officially launched before the COVID-19 lockdown. These are D’lusso and Citigrand in District 2 and the West Gate in Binh Chanh districts, all of which have achieved an average 79 per cent take up rate right before the lockdown.
Nguyen Khanh Duy, director of residential sales at Savills’ Ho Chi Minh City office, said that with a solid equity background, there appears to be little defaulting or delays to payment schedules for apartments in the coming time, despite of the COVID-19.
The number of units sold in the entire Ho Chi Minh City market dropped by 32 per cent on-year to just slightly more than 4,700 units.
With the majority of 2020 sales taking place prior to the pandemic in January and February, absorption was positive at over 50 per cent.
However, social distancing and tourism restrictions decelerated rental demand in Ho Chi Minh City.
By the end of the first quarter of 2020, all grades of affordable, mid-, and high-end apartments have suffered from drops in rental yield with a drop of 4 per cent for Grade A and 5.2 per cent for Grade B. Those rates were around 6-8 per cent in 2019 and before.
In the coming quarters, with national borders closed, timelines being uncertain, and buyers being more cautious, rental demand and investor purchasers will be affected. Yields will continue to be pressured in the near term.
From 2021, however, indicators suggest improvements in Grades A and B, with low buy-to-let stock levels and rental demand expected to recover with COVID-19 under greater control.
Over the short-term, the secondary market may come under pressure from outstanding debts. A Savills study of 40 Grade A and B projects showed levels of outstanding purchase contract payments will increase and peak in the first quarter of 2021.
The impact on personal incomes has resulted in increasing numbers of short term investors who are unable to meet their instalments, in turn pressuring secondary prices. However, in reviews of specific high-end developments, virtually all payment schedules have been maintained, with no defaults or extensions required so far. For cash-rich investors however, lower prices and illiquidity present long-term opportunities.
Social distancing is affecting developer sales strategies, but the biggest effect is on buyer behaviour.
Having healthcare, essential services, and education nearby and minimising travel has become increasingly relevant, and high-end buyers will favour smaller, less densely built, and more private developments with good amenities.
Most major developers have postponed launches or ramped up online sales efforts. Anticipated stock until 2022 is over 147,800 units, 60 per cent of which will be made by a dominant Grade C segment.
The government-led stimulus, including an emergency interest rate cut, and willingness of mortgage lenders will help mitigate the effects of COVID-19.
Developers may increasingly use their balance sheets to provide extended terms or debt to maintain competitive marketing. Decreasing household sizes and steady 2 per cent per year population growth in Ho Chi Minh City will also help boost longer-term recovery.
Factories seen in an industrial park in the southern province of Long An. Photo courtesy of Long Hau Industrial Park.
Supply of ready-built factories and warehouses in southern Vietnam will increase by 28 percent this year to 2.7 million square meters.
As more companies arrive from China after the pandemic, supply will rise by 25 percent to two million square meters in the north, real estate consultancy CBRE said in a recent report.
It added that the trend of companies seeking to reduce supply chain dependency on China is likely to benefit Vietnam.
“Surging demand from foreign manufacturers seeking to relocate to Vietnam – and a desire to commence operations as soon as possible – are driving demand for ready-built industrial properties,” said Thanh Pham, associate director of research and consulting services, CBRE Vietnam.
Hieu Le, director of the firm’s industrial leasing services, said demand for warehousing has been mainly driven by e-commerce companies who are expanding storage space and distribution networks.
After the pandemic is contained, the average asking rent for warehouses would increase by 4-11 percent, he noted.
“There is growing consumption and distribution of groceries and fresh foods, which are set to accelerate occupier demand for temperature-controlled storage.”
Analysts have said Vietnam’s industrial real estate could benefit from foreign investors moving production out of China.
Apple, Google and Microsoft are reportedly making plans to begin production in Vietnam this year. Customers have found some Apple wireless earbuds AirPods Pro carrying the ‘Assembled in Vietnam’ label rather than the traditional ‘Assembled in China’ tag.
Vietnam’s average industrial land price is 43 percent lower than that of Thailand and 54 percent lower than that of Malaysia, and its corporate income tax rate of 20 percent is among the lowest in Southeast Asia, according to a report by securities brokerage VNDIRECT.
The country’s many trade deals, especially the EU-Vietnam Free Trade Agreement, which is set to come into effect this year, would be another factor in attracting foreign investors, it added.
Vietnam has 260 industrial parks with an occupancy rate of 76 percent, according to the Ministry of Planning and Investment. Another 75 are under construction.
Competitive prices, along with advantages in climate and natural resources, are helping Vietnamese second home and holiday properties become one of the hottest investment channels in the country.
A raft of major developers are resuming wide-ranging activities as the country gets back up to speed. Photo: Le Toan
The Vietnamese tourism industry is attempting to push ahead with operations as demand from domestic tourists begins to increase exponentially.
The Ministry of Culture, Sports and Tourism has issued a “Stay At Home with Vietnam” programme to promote domestic tourism with many promotions and incentive packages by both the hospitality and airlines sectors.
It has been just over a month since business restrictions were lifted in the country, and since then there have been a raft of promotion packages available, combining accommodation, food and beverages, and airline tickets within Vietnam at discounts of around 30 to 50 per cent. These could remain in place for another month at least.
After positive signs, the tourism industry is now actively preparing for the second phase of returning to normal when it begins to welcome international visitors from safe markets.
Second home kickstart
As tourists return and demand increases, second home and holiday developers can resume their sales activities as well.
Moreover, the industry has been galvanised with the introduction of many incentives and policies issued to encourage developers to invest in the market, including stimulus financial packages and the recent decision to expand deadlines for tax submissions.
Back in February, the Ministry of Natural Resource and the Environment issued a guideline to grant ownership for tourism properties including condotels and second home villas and officetels valid for 50 years and eligible to extend to 70 years. These guidelines had already started to encourage developers, investors, and buyers that their tourism property would be granted ownership like other accommodations.
Many developers have resumed their sales campaign. Among those CEO, Vingroup, Sun Group, and Novaland are leading the market with a range of projects to woo buyers. Real estate developers are now recruiting hundreds of salesmen to cover such ventures.
According to experts, in order to increase the liquidity of the market, the government should consider permitting foreign buyers to buy second homes and holiday property in Vietnam.
They say that Vietnam has all the conditions to become a “golden destination” for second homes for foreign buyers, however, it remains behind many other destinations in the region such as Phuket in Thailand or Bali in Indonesia.
Figures from the Ministry of Construction revealed that Vietnam has around 66,000 units of tourism accommodation, compared to 120,000 in Phuket alone.
According to Doan Van Binh, chairman of CEO Group, investment from foreign buyers would make the liquidity of the market increase and attract further international tourists to the country.
“The participation of experienced foreign investors into tourism real estate will set new requirements, diversifying and improving product quality in the market,” Binh said. “Experience from other countries and the open policy of foreign real estate ownership is a key factor to attract such investment into real estate, and into tourism real estate in particular.
Vietnam should, Binh said, mimic a programme from the Malaysian government, to set up a so-called “Vietnam My Second Home” policy to attract foreign buyers into the market, which can offer residence visas alongside the valid time of ownership.
“Allowing foreigners to buy tourism real estate will attract a large capital source into this segment but can still be managed by the current regulations on conditions and procedures for foreigners to buy homes in Vietnam,” Binh added. “We hope that the open mechanisms and policies on foreigners owning real estate will soon be applied as an urgent solution to help the market recover quickly after the pandemic. At the same time, this is also a long-term solution for Vietnam to become a holiday destination and entice retirement and real estate investment, increasing competitive advantages with other countries in the region.”
Real estate expert Dang Hung Vo suggested that permitting foreigners to buy second homes in Vietnam is a good way to develop the whole tourism sector of the country.
“Vietnam is a wealthy potential country on tourism but has not been professional at all in developing the sector. We must change our mindset on tourism development and find out a better approach to help the market thrive. I think the opening for foreigners to buy a second home in Vietnam would be able to create remarkable change for the whole sector,” Vo said.
Lessons from regional countries
Many countries around the world have allowed non-nationals to invest and own properties. The openness of real estate ownership policies, which has created favourable conditions for investors in the market, has helped the second home segment in many countries develop strongly.
In Singapore, foreigners are allowed to buy almost all residential real estate products except social houses and some other specific limited products. In particular, Singapore allows them to buy villas attached to land at Sentosa Cove with a short-term ownership.
Malaysia’s aforementioned second home initiative allows foreigners with their families (spouses and children under 21 years of age) to live there with visas of 10 years or more when they meet set financial ability conditions.
The policy has thus far has created great attraction, with more than 42,000 non-nationals purchasing homes in Malaysia between 2002 and 2018.
Countries and territories which have more open policies for foreigners such as Japan, Singapore, Malaysia, and Hong Kong (China) currently boast the strongest and most sustainable real estate markets.
Meanwhile, in Thailand, there has been a new wave over the past five years of people owning a second home for “elderly relaxing” after the government issued a so-called retirement visa for foreigners over 50 years of age.
Those who fit the bill, along with meeting other certain conditions, are permitted to buy second homes in famous tourism destinations such as Phuket, Hua Hin, and Pattaya.
These regional schemes could give Vietnam further food for thought as the government ponders its next moves in the restructuring of the economy post-pandemic.