Key trends in the market, 2019 and beyond

January 24, 2019 / By  

In 2018, Vietnam’s economy grew by 7.08%, making the country one of the best performers across the region. Vietnam has been favoured by foreign investors with Japanese, Korean and Chinese investors being the most active investment groups. Real estate growth has been driven by strong economic expansion and has contributed to economic expansion.  We see the following top trends reshaping the Vietnam real estate market in 2019 and beyond.

Residential market shifts to a more sustainable mode:

Unlike previous cycles where almost all foreign investment focused on the premium segment due to more favourable profit margins, the growth in this cycle has been more broadbased. While residential property in the premium segment continues to attract investors, demand for affordable and mid-end apartments has been made strong by genuine owner-occupiers.

The expansion of the low-priced segment can be clearly seen from recent statistical data. Apartments in this segment represent a significant proportion of  total annual launches over the last few years. Additionally, the participation of foreign developers and investors in these segments, especially from Japan, has also help to affirm this trend. Over the past three years, the market witnessed a number of joint ventures between Japanese investors such as Hankyu Realty and Nishi Nippon Railroad in cooperation with Nam Long or Sanyo Homes and Tien Phat, and most recently the joint venture between Mitsubishi Corporation and Phuc Khang.

Figure 1: Ho Chi Minh City apartment for sale, new launches
Source: JLL Vietnam

E-commerce to change the retail and logistics landscape:

Vietnam is becoming one of the fastest growing e-commerce markets in the region, driven by its young and tech-savvy population, rising affluence and improved logistical facilities. Rapid penetration of e-commerce will likely lead the current immature retail market of Vietnam to leapfrog and skip some development stages such as the “mega-mall boom” that other developed markets have experienced as large e-commerce marketplaces such as Alibaba and Amazon continue to strengthen their presence. While e-commerce growth in Vietnam has only just begun, it will inevitably reshape the retail and logistics landscape down the road.

Figure 2: Projected Vietnam e-commerce revenue per year (USD billion)

Industrial and logistics/warehouse will be the most sought-after sector:

The robust growth of e-commerce has set a tone for growing domestic demand for logistics/warehouse properties. In addition, the prevailing movement of manufacturers out from China due to Vietnam’s strategic location and competitive labour cost are key demand drivers for cross border logistics/warehouse services. As Vietnam sets itself to be a more export-driven economy as well as to become a central production hubs that offer an alternative to China, manufacturers will pour their investment into the country and create strong demand for industrial properties in the near and medium term.

The Vietnam government has recently set the GDP growth target of around 6.8% for 2019, slowing slightly from 2018’s robust pace given the prevailing trends in the region. In view of the favourable market fundamentals, we expect the strong growth momentum to continue in 2019 and beyond.

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