Will the property market return to its excitement?

The government has been stepping up infrastructure development having a direct impact on the property market and becoming its key growth engine going forward. Noticeable infrastructure projects include those completed in 2020 such as the VND 6,300bn Lo Te- Rach Soi Expressway completed in Oct 2020; the VND8,500bn Hanoi Ring Road No.3 completed in Nov 2020; and those starting construction in 2021 such as Long Thanh international airport Phase 1 project (broken ground in early 2021); six of the 11 subprojects in the eastern section of the North-South Expressway which have started construction while five others are expected to kick off in 2021F.

After new regulatory measures such as Decree 148 and Amended Construction Law 2020 issued in 2020, VNDirect projects the HCMC new condo supply will recover from 2022F, with 26.2% yoy in 2022F and 55.7% yoy in 2023F, of which mid-end segment bounces with a 30-50% contribution of total condo supply. “The suburb housing market in HCMC namely Binh Chanh, Can Gio, Nha Be, Thu Duc City will continue to do well in 2H21-2022F, driven by the infrastructure project development in these areas”, VNDirect forecasted.

VNDirect observes there was no new affordable housing project launched within recent five quarters. Supply shortage while demand is still high, resulting in secondary prices for  areas offered below US$2,000 psm will record a faster growth.

As a result of strong price escalation along with limit  ed supply, investors are looking for  new opportunities in neighboring provinces to HCMC such as Long An and Dong Nai. In 5 months of 2021, new supply and sales volumes for  ready-built houses in Dong Nai reached 3,539 units/936 units, followed by Long An with 625 units/ 468 units respectively, according to DKRA.

VNDirect expects to see a 40% increase in new condo supply in 2021F to 25,000 units, dominated mostly by units in the west and the east of Hanoi, driven by the stable new supply from Vinhomes' massive projects, followed by Sunshine Empire (c.2,200 units) and Gamuda City (c.2,000 units). Meanwhile, landed property market at Hanoi’s neighboring provinces such as Hung Yen are likely in the spotlight in FY21-22F. Vinhomes also plans to launch a 460ha mega township in Hung Yen in 2H21F.

An upward trend in the landed market across Hanoi with land prices rising 14.5% yoy on average in 4M21, mostly driven by the announcement of master plan for  Red River. We believe housing prices in Hanoi will slow down in 2H21F thanks to tightening land management in tempering areas, said VNDirect.

VNDirect considers Hung Yen as one of the Northern emerging property markets, along with Bac Ninh and Quang Ninh. This province situated at the heart of the Northern Delta, having a favorable connection to Hanoi, Hai Phong and Nam Dinh. According to CBRE, in 2020, selling prices for  landed property in Hung Yen rose 12% yoy, higher than the Hanoi average rate of 7.6%.

New landed supply in Hung Yen could reach 2,500 units in 2021F, 16.8% higher than that of Hanoi, mostly from mega township projects namely Ecopark (500ha) and Vinhomes Dream City (460ha). “These projects will achieve a take-up rate of 70-80% in 2021F, driven by high demand from experts, engineers, and workers in this area”, VNDirect believes.

New landed supply in Hung Yen could reach 2,500 units in 2021F, 16.8% higher than that of Hanoi, mostly from mega township projects namely Vinhomes Dream City (460ha)...

VNDirect also believes that hospitality property will recover quickly in the future on the back of Covid-19 vaccines presence along with recovery of the Vietnam tourism. The headwinds from the pandemic may be over in the hospitality property market from end- 2021.

All countries around the world are stepping up their immunization efforts to combat the COVID-19 pandemic. Several countries stand out for  rolling out vaccination, of which Canada has the highest percentage of the population (61.6%) vaccinated with at least one dose of the COVID-19 vaccine, following by the UK (59.4%), US (50.9%), Germany (45.1%), Italy (43.1%), France (41.2%) and China (estimated at 36.0%), sai VNDirect.

According to Vietnam National Administration of Tourism, the path to recovery for  Vietnam’s tourism will follow four stages: (1) recovery led by domestic tourism; (2) pilot reception of limit  ed international tourist groups in certain tourist sites; (3) reception of visitors from countries with good progress in Covid-19 containment; (4) full recovery of international tourism.

However, the property market will face some challenges such as prolong pandemic could restrict marketing and sales activities; Housing prices have increased rapidly, especially in decentralized and sub-urban areas, which are raising concern and

 pricing out of the market for  home buyers; Rising construction costs on material prices hike in FY21F, especially steels prices have increased more than 45% yoy. This could drive up housing prices if those remain at the current high level in the next two years; The individuals earning income from property leases with a price of more than VND8.33m per month, are subject to tax even if they do not have full 12 months for  lease in a calendar year under the Circular 40/2021/TT-BTC issued on 1 Jun 21, which will take effect from 1 Aug 21. This could impact the rental housing market when this market is suffering due to COVID-19.