As Vietnam’s economy is emerging from lockdown, many first-time home buyers are wondering if this is an opportune time to invest in real estate. Aside from financing costs, buyers in Vietnam need to consider a number of country-specific factors to maximize returns and protect themselves from legal worries.
We consulted Vietnam’s real estate experts for their tips on how a millennial Vietnamese should go about building their property portfolio. We also looked into emerging trends across commercial, residential or hospitality sectors and into factors driving the industry’s adoption of PropTech solutions.
Phillip An, Co-founder, Homebase
I'm a millennial Vietnamese researching whether or not to buy real estate right now. What's your take?
Definitely buy, but with the caveat that due diligence should be done before making a buying decision.
From a macroeconomic perspective, there is much to be optimistic about in the Vietnam market. In general, we can expect to see continued rapid appreciation in property prices as the country is becoming an increasingly attractive destination and a major player on the geopolitical stage. For the Vietnamese millennials today, real estate as an asset class remains not only one of the best ways to build wealth, but also a means of establishing a foundation to start a family.
However, not all real estate properties are created equal, so an investor may end up facing an array of complexities and unforeseen outcomes. This is especially true when buyers/sellers face a convoluted transaction process with many middle-men, often resulting in future title/ownership issues. Sometimes issues emerge even when dealing with large developers.
Bank loans are extremely expensive (or completely inaccessible, in case of expats), so millennials without substantial savings struggle with financing, and so do non-residents. At Homebase, we’ve seen many customers face similar issues, especially when it comes to financing. So it’s important to do research and work with trustworthy partners before making the buying decision.
Globally, PropTech and a wave of tech innovations are poised to disrupt real estate markets. Is Vietnam embracing the change?
PropTech is a burgeoning industry in Vietnam that has seen rapid growth in the past several years. But Vietnam is yet to achieve the scale and maturity seen in more developed markets such as the US, Europe or even China and South America.
In recent years, we've seen an explosion of domestic players tackling the so-called "PropTech 1.0 Model". Despite many new entrants, these legacy listing platforms have managed to maintain their market lead, with the newcomers crippled by poor data reliability.
"PropTech 2.0" models of co-working/co-living, property management and digital brokerage are gaining popularity as well. Digital brokerage is an interesting market, especially in the US. In Vietnam, however, the very nature of the market means that brokerage firms are often limited to primary market sales.
Recently, as the financial and regulatory market has matured, Vietnam has seen the emergence of "PropTech 3.0" models, such as Homebase - equity co-investment for property co-ownership. The potential of these models in Vietnam is huge and the future is bright.
What are some of the trends and changes that the industry will need to adapt to in the next few years?
The biggest headwind facing Vietnam’s residential real estate industry will most likely be legal issues surrounding construction and ownership, especially for real estate developers. While some of the confusion around land and construction permits have been clarified in the past several months, we are still seeing many projects mired in delays. Even certain residential projects that have been handed over to customers may have issues receiving the “pink book”. As Vietnam’s real estate market sees more foreign interest, we must build trust, and transparency is more crucial than ever, as well as simplifying administrative complexities.
Cosimo Jencks, Chief Representative, Hongkong Land
I'm a millennial Vietnamese researching whether or not to buy real estate right now. What's your take?
Depending where you are looking to buy. Hanoi has oversupply and opportunities, whilst in Ho Chi Minh City supply is tight and finding the right product could be hard. On a generational basis, interest rates should be the lowest in over 30 years and are likely to remain low, facilitating purchases. With the upcoming National Congress and focus on infrastructure, new areas and land plots should open up.
Globally, PropTech and a wave of tech innovations are poised to disrupt real estate markets. Is Vietnam embracing the change?
Co-working and, until recently, short-term rentals through Airbnb were major growth areas in Vietnam, but both have faced headwinds during the pandemic. Whilst they will come through this phase, we are likely to see consolidation and the emergence of new players. Fractional ownership and Fintech solutions are yet to emerge due to market and legal characteristics.
Commercial, residential or hospitality: what are some signals about the future for each one in Vietnam we should know about?
Demand for both office and retail space was disrupted and the segment is yet to fully recover, whilst industrial came forward as a hot sector amid tech and trade wars. Residential yields are reducing but cheaper cost of funds seem to continue to drive some activity, but caution is required. Hospitality is likely to see serious ownership changes, with areas which can be driven to outperforming those destinations one needs to fly to. At least until international flights are resumed. It will be interesting to see how the condotel story develops further.
What are some of the trends and changes that the industry will need to adapt to in the next few years?
It will be interesting to see if we go from significant availability of capital at relatively high cost to a scenario of cheapening but scarce capital. Whether the easier suburban development continues through the next political term or whether the Government seeks to re-address city center development will have significant impacts on the industry. Some trends to watch post-COVID are retail and tenant mix and developments in such sectors are cinema, gym, F&B, education and clinics.
Ruby (Ngoc) Nguyen, Director, PropTech Platforms
I'm a millennial Vietnamese researching whether or not to buy real estate right now. What's your take?
I will focus on residential real estate here. Every crisis brings with it price volatility and uncertainty, and my view is a long-term one, focusing on the things you can control and being aware of opportunistic deals on the market.
Right now, residential property prices are still holding up quite well, without showing any signs of price crash. COVID-19 may throw up several opportunities, but you still need to do due diligence. In the primary market, some property developers are experiencing financing and legal issues, so prospective buyers need to be cautious and not rush into finalising deals. Also, I don’t see mortgage rates dropping anytime soon, so you should plan for an emergency fund.
The rental market is in a jeopardy state with a demand shock and rentals dropping, so a lot of landlords are putting their houses on sale. I’d say there are some good deals in the resale market and the scope for pricing negotiation is higher than before.
Globally, PropTech and a wave of tech innovations are poised to disrupt real estate markets. Is Vietnam embracing the change?
Yes, PropTech firms, such as Vietnam’s Rever and Propzy, attract investors who are interested in technology as well as investors who are interested in real estate as an asset class. If we take the long-term view, millennials may represent the largest share of property buyers/sellers and investors and they see technology as a means to streamline the inefficient process of renting, buying and selling properties. Millennials are also more tech-savvy and have high expectations for service, transparency and personalization.
Commercial, residential or hospitality: what are some signals about the future for each one in Vietnam we should know about?
In the residential market, COVID-19 will force out players with weak fundamentals and will help to accelerate the consolidation of some very fragmented markets.
Also I predict a lot of demand for data analytics for property transactions, property development, valuation and even home financing. At One Mount Group, we are working with financial institutions to digitalize the home financing experience, and to create more home financing choices for targeted customer segments with the help of data.
At the PropTech Vietnam Network, we see increasing interest from both property developers, consultancy firms, VCs and aspiring startup founders. Hence, I believe the increasing investment into PropTech and the participation of traditional players will help to boost the growth of PropTech in Vietnam.
