The actors of property development in HCMCOctober 30, 2020 / By
The real estate market in Ho Chi Minh City (HCMC) – the economic capital of Vietnam, has grown significantly, in line with the economic performance. Many developments have been initiated and completed and have led to a dramatic change of the urban landscape of HCMC, as shown in Figure 1. Besides, the city witnessed the change in the lifestyle of urban residents who, more and more, accept to live in high-rise projects. The trend has transformed not only the appearance of the city but also the way how urban residents live, work and play.
Figure 1: The coverage of completed high-rise condominium projects in 2007 vs 2019
Source: JLL Vietnam Research and MapIT
The dramatic change in the urban landscape of the city has prompted our research interest in the sector. The Government has undoubtedly played a major role in urban development in Vietnam. However, developers taking part in urban development are also fast becoming the most effective actors to provide basic services, infrastructure, and affordable housing to the expanding population. In contrast, an initiative from the city authorities to provide housing for people has not gained traction due to lack of funds. The involvement of entrepreneurs operating in the field of real estate is quite noticeable. In Vietnam, there are five general groups of real estate developers, categorised by their official relationship with the Government.
Statistical analysis of the market share of each group based on total launching units (Figure 2) showed that companies having a weak relationship with the Government have been dominating the housing market share. These include private and foreign companies.
Figure 2: Condominium Developer type by total supply
Source: JLL Vietnam Research
Figure 3: Condominium and Ready-built property (RBL) market share by developer type
in term of by total supply, as of 2019
Source: JLL Vietnam Research
The breakdown (Figure 3) shows that in HCMC, both the state-owned and equitised state-owned companies have not been able to gain market share, despite having political connections and thereby advantages in accessing the land bank. In comparison, private sector developers with the ability to get better access to capital and professionalism in executing projects, seem more able to grow their market share.
Continuing the trend seen in the past 20 years, private sector developers will take the lead in urban development in HCMC, with larger-scale projects to be built in the urban periphery. The Vietnam Government is keen to involve the private sector, although it will try to strike a balance by controlling the amount of real estate construction and development activities across the country. The question that needs to be explored is whether developers should balance between the profit maximization goal on one side and the public interest on the other are the high art of sustainable real estate developers.
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