10 years, real estate prices increased dozens of times; attractive profit rate, market attracts foreign capital

The reasons for the constant increase in real estate prices, the 'quenching of thirst' for social housing in Hanoi , Thanh Hoa abolishing the decision to select investors for a project... are the latest real estate news.

Real estate is a highly “domestic” product, so the price increase rate will depend on the market in each region and the balance of supply and demand. (Source: XD Newspaper)

Reasons why real estate prices keep increasing

The recent real estate market report published by the Vietnam Real Estate Brokers Association shows remarkable information about the increase in real estate prices. Accordingly, in just the past 10 years, real estate prices have increased dozens of times. In 2021 alone, real estate prices grew by an average of double digits, many times higher than the same period last year.

The Vietnam Real Estate Brokers Association believes that the reasons for the continuous increase in real estate prices over the past decade are high inflation, low interest rates and a shortage of supply. In particular, the continuous increase in real estate prices is an undeniable fact.

Specifically, according to a survey by Batdongsan.com.vn, up to now, the growth momentum has been deeply differentiated when the growth rate is still going up in some segments, but in some segments, the growth rate has stopped and prices have started to turn down.

Meanwhile, data from the Ministry of Construction 's third quarter 2023 real estate market report also acknowledged this reality when it said that the average selling price of newly opened apartments in the third quarter increased by nearly 7% quarter-on-quarter, increased by 14% year-on-year and reached about VND50.8 million/m2.

Industrial land in cities that strongly attract FDI such as Bac Ninh, Bac Giang , Hung Yen... has an average rental price of 3.2-3.4 million VND/m2/rental period, a sharp increase compared to the same period last year, when the rental price fluctuated between 2.3-2.7 million VND/m2/rental period.

Ms. Do Thu Hang, Senior Director of Savills Hanoi, said that in the current market context, depending on each segment and market with differences in supply and demand balance, the increase or decrease in selling price and liquidity is different.

Notably, the growth drivers of the Vietnamese real estate market are very large, coming from the urbanization process along with infrastructure development, strong population growth leading to great demand for housing, therefore, in the long term, real estate prices will still record an upward trend, although currently they may be slowing down due to certain difficulties.

According to Chairman of the Vietnam Real Estate Brokers Association Nguyen Van Dinh, most of the upcoming projects in Hanoi and Ho Chi Minh City are located in districts far from the center, where land funds are still abundant and infrastructure is constantly being improved, which will continue to push the price level of these projects higher in the future.

Besides, real estate is a highly "domestic" product, so the price increase rate will depend on the market in each region and the balance of supply and demand.

Vietnam market will continue to attract foreign capital

A large amount of capital from foreign investors is expected to flow into the Vietnamese real estate market in the period 2024-2026.

Many transactions have been and are in the negotiation process and are quite active; the expected investment goals are still in finding clean, good quality, valuable land funds, as well as having legal ownership, complete compensation and clearance, and development potential...

This is the recently announced assessment of Cushman & Wakefield Vietnam Company on foreign mergers and acquisitions (M&A) activities in Vietnam in the coming time.

According to Cushman & Wakefield Vietnam, transaction data in 2023 shows that foreign investors still account for the majority of real estate transactions, acquisitions and investments, while domestic investors account for less than 10% of the number of transactions.

This is because domestic enterprises are still facing many unfavorable factors such as the general economic difficulties, unresolved project legal issues, many shortcomings in corporate bonds, and lack of access to capital flows.

Ms. Trang Bui, General Director of Cushman & Wakefield Vietnam said: “In a series of investment events that Cushman & Wakefield organized earlier this year, through a survey with clients across Asia Pacific about the markets they are most interested in, the majority of responses were very positive about the investment potential in Vietnam.”

According to Ms. Trang Bui, when the global economic context is experiencing many fluctuations, an emerging country like Vietnam has become a potential market to attract investment.

Going into more specific analysis, experts from Cushman & Wakefield said that Vietnam has been and continues to be in the 'sights' of a large amount of foreign direct investment (FDI).

The Vietnamese real estate market, notably Ho Chi Minh City and Hanoi, has been developing rapidly in recent years. M&A activities in general and in the real estate sector in particular have also been recorded to have increased significantly in both the number and value of transactions.

Although the economic situation in general and the real estate market in particular from the beginning of 2023 until now have faced many challenges, real estate investment and M&A transactions are still taking place.

The total estimated value of real estate investment and M&A transactions in the first 9 months of 2023 reached 729 million USD, down 33% due to the lack of large-value deals compared to the same period last year.

According to experts from Cushman & Wakefield, the attractive rate of return in an emerging market like Vietnam is an important factor in foreign investors' investment decisions.

Through the first 9 months of 2023, Vietnam recorded a total investment capital and real estate M&A of about 4.2 billion USD; of which, housing and industrial types accounted for 46% and 28%, respectively. This shows that foreign investors' appetite is still focused on traditional assets in Vietnam, mainly serving the need for "settling down and making a living".

Apartment building in Thu Thiem urban area, HCMC. (Source: VNA)

Hanoi approves 3 more social housing investment projects

The Hanoi People's Committee has just issued a Decision approving and updating the list of housing and urban area construction investment projects in the city's Housing Development Plan for the period 2021-2025 (Phase 2).

Specifically, for investment projects in the construction of commercial housing and urban areas, the city has approved and updated 12 projects. Of these, 8 projects are under implementation and are expected to be completed in the 2021-2025 period; 3 projects are expected to be completed after the 2025 period and 1 project is undergoing investment preparation procedures.

Notably, the Hanoi People's Committee also approved and updated 3 social housing construction investment projects.

The first is the social housing construction investment project at plots CT4 and CT5 of the Dai Kim New Urban Area construction investment project (Dai Kim ward, Hoang Mai district). The project has a total area of 2.03 hectares, including 562 apartments. Currently, the investor is preparing to invest in the construction of high-rise buildings at plots CT4 and CT5, expected to be completed in 2024.

The second is the social housing investment project at CT6B plot, Tay Nam Kim Giang New Urban Area (Dai Kim Ward, Hoang Mai District). The project has a total investment of VND 1,293 billion, on an area of 10.85 hectares. The project has a total floor area of 33,120m2 with 552 apartments. The project is carrying out investment policy decision procedures, expected to be completed in 2027.

Finally , the social housing investment project at CT7 and CT8 of the new urban area Tay Nam Kim Giang 1 (Dai Kim ward, Hoang Mai district and Tan Trieu commune, Thanh Tri district). The project has a total investment of 1,394 billion VND with 937 apartments. Currently, the investment policy decision procedure is being carried out. Expected to be completed in the period of 2026-2027.

The three social housing projects above will provide the housing market with 2,051 additional apartments, expected to contribute to "quenching the thirst" for social housing for people.

Previously, according to statistics from the Ministry of Construction, in the third quarter of this year, nationwide, 19 social housing projects for low-income earners and industrial park workers with a scale of 18,752 units were completed and construction investment was implemented.

Of which, 5 projects have been completed with a scale of 850 units (equal to 176% compared to the second quarter of 2023. There are 2 projects with a scale of 5,223 units that have started construction.

In addition to the above-mentioned projects that have been started, in the third quarter, 12 projects with a scale of 12,679 apartments were approved for new investment policies.

Abolish the decision to select investors for residential area projects

On November 28, information from the People's Committee of Thanh Hoa province, Mr. Mai Xuan Liem, Vice Chairman of the People's Committee of this province signed a decision to cancel the approval of the preliminary selection results of investors to implement the residential area project in Dong Linh commune, Thanh Hoa city, on the grounds that it did not comply with regulations.

Accordingly, the People's Committee of Thanh Hoa province abolished decisions related to the project such as: decision to approve the pre-qualification invitation documents for investor selection; decision to approve the pre-qualification results for investor selection; decision to approve the investor selection plan.

The above-mentioned abolished decisions were signed by the Chairman of Thanh Hoa Provincial People's Committee in 2020. The reason for the abolition was because the content did not comply with current legal regulations.

Specifically, the residential area project in Dong Linh commune, Thanh Hoa city does not allocate enough land to build social housing according to the Government's regulations on the development and management of social housing.

Thanh Hoa Provincial People's Committee assigned the Department of Construction (the inviting party) to preside over and coordinate with relevant units to carry out legal procedures so that the project ensures the conditions for determining investment projects using land according to regulations.

After the project meets the conditions, the organization prepares a dossier requesting approval of the investment policy, submits it to the competent authority for decision, and serves as a basis for organizing the selection of an investor to implement the project.

Dong Linh Commune Residential Area Project has a land area of over 19 hectares. The total investment of the project is over 1,700 billion VND, of which the cost of compensation for site clearance is 73.8 billion VND.

In 2020, there were 2 investors who passed the preliminary selection for the above project, including: the consortium of Viet Nhat Duc Exploitation Joint Stock Company - Thanh Cong Group Company Limited; the consortium of 5 companies (Truong Phat Investment and Construction Consulting Joint Stock Company; T&T Tourism Investment Joint Stock Company; Khanh Linh Construction Consulting and Investment Company Limited; Hoang Hai Construction Investment Joint Stock Company; Tecco Group Joint Stock Company).

Source