Mid-end segment to dominate property market

Vietnam’s real estate market will see strong development in the middle-end apartment segment, according to experts.
Mid-end segment to dominate property market ảnh 12019 is expected to continue to be the year of the middle-end product market. (Photo: VNA)

Hanoi (VNS/VNA) -
Vietnam’s real estate market will see strongdevelopment in the middle-end apartment segment, according to experts.

“2019 is expected to continue to be the year of the middle-end product market,with a reasonable price that is suitable for the budget of most people,” DuongDuc Hien, Director of Residential Sales at Savills Hanoi, said at a pressconference releasing a report on Hanoi’s property market in the fourth quarterof 2018 held in Hanoi this week.

In addition, shop-houses, landed property and products that are built nearconvenient services will also attract end-users, Hien said. The market stillhas high demand for those products because of migration trends from otherprovinces and cities to large cities, the trend of separating households anddegraded housing in cities.

The market is not expected to witness new kinds of property, he said. Theexisting property products will see adjustments to make them more suitable tothe demands of customers. For instance, the market will not see 90-sq.mapartments with three bedrooms, because the rooms are too small. Meanwhile,apartment design will expand to balconies, loggia, and windows to catch naturallight. These trends are expected to help the housing market achieve sustainabledevelopment.

Le Vu Thanh Tam, expert from the Economic and Finance Academy, said positiveforecasts on Vietnam’s macroeconomic development indicators would support thestable development of the real estate market this year.

With the free trade agreements (FTAs) that Vietnam has joined and positiveimpacts from Industry 4.0, Vietnam will receive more foreign investment fromfunds and new projects, including more capital for the property sector, Tam said.

Accordingly, there will be about 2.5 to 3 million people from rural areasmoving to the city, along with tens of thousands of foreign workers andengineers, so housing demand will surge in many segments.

Meanwhile, the supply is expected to drop because there aren’t many availableapartments from old projects and the market will not see many new projects dueto a lack of land and low financial ability of investors, Tam said. The demandwill increase pressure and push prices up.

Tam also said the State has taken action to limit credit for real estate andsecurities lending but has encouraged banks to increase loans for productionand business. Therefore, property projects will find it difficult to approachcredit.

Along with that, the State will tighten land use plans and control propertyprojects so the real estate market this year is likely to cool down, meaningproperty prices are unlikely to increase in many provinces and cities,especially Hanoi and Ho chi Minh City. There are even some projects which mayreduce selling prices, Tam said.

With many positive forecasts in macro-economic development and the government’ssolutions to control the property market, Tam said, Vietnam’s real estatemarket will not see a bubble or freeze.

However, Tam said, the property market may face challenges from changes inmacro-economic development, market supply and demand and monetary policies ofthe State Bank.

To reduce negative impacts from those factors, the state management agenciesand enterprises in the real estate sector need to ensure macro-economicstability as well as business activities and the state agencies shoulddiversify capital sources for businesses, Tam said.

“This year, mid-end products are expected to keep dominating the Hanoi marketwith the launch of township developments,” said Nguyen Hoai An, Director, Hanoibranch of CBRE.

“For upscale segments (high-end and luxury), recent progress in prime sites in Hanoisignals the return of the luxury segment after two years without new supply. Interms of location, while more than 50 percent of new launches are expected inthe west, the east is forecast to be more active as 30 percent of new supply islocated in this area.”

“Before, the position of projects used to be the top priority when choosingproperty products. However, with upgraded transport infrastructure that ishappening at present, the importance of position will reduce,” said Hien fromSavills’ Hanoi branch.

Therefore, investors need to have a long-term vision for the project’spotential after 5-10 years, when the infrastructure is developed, on whetherthe project will still attract buyers or not.

Meanwhile, customers should have a more open mind for housing products,especially when buying for long-term investment, because a disadvantageouslocation today could become advantageous in the future with more developedsurrounding infrastructure. They should study this situation, he said.

In 2018, condominiums for sale in Hanoi continued to see high levels of newlaunches, with around 30,000 units, according to the CBRE Vietnam’s report on Hanoimarket in the fourth quarter 2018 released on January 10.

During 2018, Hanoi’s market has further shifted towards the mid-end segment.The share of this segment in total new launches has expanded to 70 percent from63 percent in 2017, showing that end-users are still a major source of demandin Hanoi. Noticeably, the market witnessed the launch of large-scale townshipsincluding VinCity Ocean Park and VinCity Sporti.

In terms of location, the decentralisation trend continued in 2018 when therewas only 2 percent of new supply launched in the four core districts.Additionally, Hanoi’s residential market has expanded to suburban areas with anincreasing number of new projects launched in locations outside the 10-kmradius from the central business districts (CBD). In 2018, projects in suburbandistricts such as Thanh Tri, Hoai Duc and Gia Lam accounted for 20 percent oftotal new launches.

According to Savills Vietnam’s report on Hanoi’sarket in Q4, 2018, transactionson the apartment market rose by 81 percent quarter-on-quarter (QoQ) and 69 percentyear-on-year (YoY) whilst the absorption rate increased by 9 percentage points(ppts) QoQ and 5 ppts YoY to 34 percent.

The CBRE report said the pricing level of Hanoi’s condominium market was keptstable given the dominance of the mid-end segment. While Hanoi’s market isstill an end-user market, affordability still plays important role for buyers.However, we still observe upward trends in several projects in the high-endsegment, especially those in locations such as West Lake and across Ring RoadNo 3. — VNS/VNA
VNA

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