Vietnam property market remains positive

HCMC’s condo supply likely to bottom out

Recovery of macro fundamentals

The global economy would remain strong growth momentum in 2022F. The International Monetary Fund (IMF) forecast the global economy to expand by 4.9% YoY in 2022. It is noted that the global economic growth rate averaged around 2.8% per year in the period 2016-2019 (before the COVID-19 pandemic). “Being the largely net exporting economy, Vietnam is well-placed to reap the benefits from global demand recovery. In addition, we expect a high vaccination rate for Vietnam with 70-75% of its population 1H22. We project Vietnam’s GDP rising by 7.5% in 2022, with resilient growth in all sectors”, VNDirect forecast.

Meanwhile, this stock company does not see the inflation risk in the next two quarters. Vietnam’s headline inflation slowed to 2.1% YoY in Sep (vs. 2.8% YoY in the previous month). For 9M21, headline CPI averaged at 1.8%, which was far below the government’s target of 4.0%. “We expect inflation pressure to remain low in the next two quarters before rising since 2Q22 due to (1) the recovery of domestic demand and (2) no longer government price reduction for electricity, water and telecommunications as in the second half of 2021 and (3) high energy prices expected in 2022F”, VNDirect stressed.

Low mortgage interest rates

In VNDirect’s view, the average mortgage rate from local banks stayed relatively flat in 9M21, in a range of 9.2-9.5%, still a 10-year low. Given the benign inflationary pressure, the SBV would maintain its accommodative monetary policy into 2022F. “We maintain our view that the mortgage rates will still be remained at a low rate until late-2Q22 at the earliest to lower barriers to financing and owning a property”, VNDirect said.

Accelerating infrastructure development

Stricter social-distancing measures and construction material prices hikes caused several delays in the implementation of public investment in 3Q21. However, public investment recovered steadily in Oct 2021 after the government eased social-distancing measures across the country since late-Sep. Per GSO data, the implemented state capital (public investment) jumped 20.4% mom to VND41.7tr (-13.9% YoY). For 10M21, implemented state capital dropped 8.3% YoY to VND318.6tr (vs. an increase of 31.6% YoY seen in the same period last year), equivalent to 64.7% of the full-year target. The government has planned to disburse 95% of the public investment plan for 2021 that could be achievable, in VNDirect’s view.

Given that government bond interest rates are at historic lows and inflation is well-managed, VNDirect believed that the government would release more fiscal stimulus packages to support economic recovery, focusing on increasing the value amount of public investment in transport infrastructure and social-housing projects development. In the long term, public investments, especially in infrastructure development with a direct impact on the property market, will become its key growth engine going forward.

Noticeable infrastructure projects include those starting construction in 2021 such as 1) Long Thanh international airport Phase 1 project (broken ground in early 2021), 2) Six of the 11 sub-projects in the eastern section of the NorthSouth Expressway which have started construction while five others are expected to kick off in 2021F; and those expected to complete construction in 2H21-22F such as 1) Nhon – Hanoi Station; 2) Thu Thiem 2 bridge 2Q22 and 3) Metro Line 1 (Ben Thanh – Suoi Tien).

In addition, VNDirect saw there would be some upcoming approval for new zoning plans that should enhance infrastructure development and land prices as well. Of which, the proposal on establishment of Northwest City comprising Cu Chi and Hoc Mon, in tandem with planning for urbanizing Hoc Mon, Binh Chanh, Nha Be, Cu Chi, and Can Gio into urban districts lifted land prices rapidly in 1H21 in those areas. “We believe the developers that own land bank in those areas such as VHM, NLG, KDH will enjoy the benefits of rising land prices”, VNDirect said.