Despite all the signs of growth from the first quarter of 2021, the real estate market in the second quarter of 2021 showed a much slower pace due to the impact of the fourth Covid-19 wave in Vietnam.
The US-China economic war has caused many investors to look for places to shift their investments out of China. Vietnam has become one of the most attractive destinations for investors thanks to the government incentives, competitive labor costs, stable macroeconomic and political environment.
The industrial zone real estate market – the brightest spot of the market
The supply of industrial zone real estate continued to grow in the first quarter of 2021 to meet the needs of investors. According to statistics of the Ministry of Planning and Investment, as of the first quarter of 2021, the whole country has 370 industrial zones established with a total natural land area of about 115,200 ha. At the same time, many industrial projects in 13 provinces and cities were approved right in the first quarter of 2021, ensuring the supply of thousands of hectares of new industrial zones in the future.
In both the North and the South, occupancy rates in the key economic areas remained stable. In Hanoi, the occupancy rate is up to 90%, up 2.3% compared to the first quarter of 2021. Meanwhile, the Southern area recorded the occupancy rate in Ho Chi Minh City at 88%, up 2.2% compared to the first quarter of 2021.
The average asking price in Hanoi as of Q1/2021 increased about 1% compared to Q4/2020 mainly due to relatively limited supply. Hanoi currently has the highest average rental price in the Northern provinces. The rental average price in Hanoi is 70%, 47%, and 48% higher than Hung Yen, Hai Phong, and Bac Ninh, respectively. In HCMC, rental prices increased by 7% over the same period last year. Therefore, HCMC became the place with the highest rental rates in the country. Its price is higher than Hanoi 27%, Long An 46%, Binh Duong 68%, Dong Nai 83%.
The retail real estate segment has begun to recover in price
The retail real estate segment is witnessing a price increase again. Specifically, in Hanoi, the average rent in the central area increased by 2.4%, and the non-central area increased by 4.5% compared to the previous quarter. The reason for this growth is that many brands that have opened more branches such as Pandora, Haidilao, Weekend Max Mara.
In the Ho Chi Minh City market, rents in both central areas recorded stability compared to the previous quarter. However, the epidemic has caused many brands to close some branches such as Mumuso and Funny Land.
The real estate market for apartments for sale dropped sharply in both supply and transaction volume
Opening and selling activities and transaction volume in Ho Chi Minh City decreased significantly in the first quarter of 2021. New supply decreased by nearly 74.3% compared to the previous quarter and 23.2% to the same period last year. Transaction volume decreased by about 62.2% the previous quarter and 29.8% to the same period last year. However, the average price level increased by nearly 5.2% compared to the previous quarter and 17.3% over the same period last year.
In Hanoi, new supply decreased by nearly 65.9% compared to the previous quarter and 73.1% to the same period last year. Transaction volume decreased by 35.0% compared to the previous quarter and 49.6% to the same period last year. The average price level increased by 6.5% compared to the previous quarter and 9.1% to the same period last year mainly due to high prices at newly inaugurated projects.
The rest of the real estate market also suffered from the epidemic
After a period of strong price increases in some northern provinces and cities, land prices in the second quarter of 2021 have a slowdown in both price and interest. In the first quarter of 2021, many areas have set new price records in a series of provinces around Hanoi. For instance, the land price in Hoa Binh has increased by 102%.
However, in the second quarter of 2021, the asking price had decreased by 10-12%. At the same time, the people interest also decreased sharply. In particular, the level of interest in Bac Giang decreased by 49%, Bac Ninh and Ha Nam by 46%, Vinh Phuc by 38%, Thai Nguyen by 6%, and Hung Yen by 4%. This situation is because the government has tightened control of land prices, avoiding inflated prices for profiteering. Also, the impact of the epidemic makes investors limit transactions.
The rental real estate market decreased slightly compared to the same period last year. The supply of apartments for rent in Hanoi increased by 14.6% compared to the first quarter of 2020, but the rental price of the whole market decreased slightly by 2% compared to the fourth quarter of 2020 and decreased by 8% compared to the same period in 2020.
In Ho Chi Minh City, the situation of the apartment rental market continued to decrease in the first quarter of 2021. The average rent decreased 2% compared to the previous quarter and 10% to the same period last year. The average occupancy rate decreased 2% to the previous quarter in Q4/2020 and down 3% to the same period last year. Capacity was mainly affected by long-term contract cancellations and short-term demand decline.
Market forecast for the second half of the year
The fourth wave of Covid-19 is now having a strong impact on Vietnam’s real estate industry. Industry experts have made two forecasts for the rest of 2021.
In the first case, if this epidemic continues to be successfully controlled in a short time like the previous ones, the real estate market will remain stable and recover soon. Besides, investors are familiar with this issue and willing to adapt. According to Mai Duc Toan, Director of Sales and Marketing Division of CNT Group, from now to the end of the year, the real estate market is still difficult to predict. “If the epidemic is controlled, the market will be mid-year to the end of the year. The year will bounce back, recover and be vibrant, but it won’t be as good as the first period of the year,” said Toan.
In the second case, experts are warning, if the Covid-19 epidemic lasts until the end of this year, real estate will be much more difficult. The reason is that it has exceeded the tolerance level of the market. The prolonged epidemic led to social distancing, which in turn led to paralysis of all economic sectors, not just real estate. At that time, secondary investors cannot liquidate and exit. Hence, the market will fall into a stagnant state, possibly even leading to a freeze. If this bad case happens, it will take us a very long time to bring the market back to stability, yet vibrant.