2021: LOOKING BACK THE DEVELOPMENT OF REAL ESTATE IN VIETNAM
Looking back on the historical path since the mid-90s, the real estate in Vietnam has had periods of hot growth. Followed by a period of decline and freezing, with a brilliant recovery, and in the first half of 2020 to slow down due to the impact of the epidemic. Looking back at the panorama of the real estate market in 25 years of ups and downs. The development of the Vietnamese economy through the perspective of Mr Neil MacGregor – General Director of Savills Vietnam.
The period 1995 – 1998: The peak period of real estate in Vietnam
The year 1995 marked a particularly important development milestone for Vietnam. When at the same time officially normalizing relations with the US and joining the community of Southeast Asian countries (ASEAN). This period is considered to be a successful development period of Vietnam when moving from a centrally planned economy to operating under a market mechanism, creating great progress, changing the whole economy.
According to the General Statistics Office, Vietnam achieved growth of over 9% achieved in 1995 (9.54%) and 1996 (9.34%), corresponding to GDP per capita reaching the level of 277 USD (1995) and 324 USD (1996). Inflation has been controlled from the double-digit level from 1995 (12.7%) to 4.5% (1996) and 3.6% (1997).
The chart shows Vietnam’s GDP over the years
This is also the peak time for Vietnamese real estate. The strong GDP growth has made people believe in the bright future of the economy, promoting a sharp increase in housing prices.
Due to the opening of integration, the financial-monetary crisis that happened in 1997-1998 in Asia also had a certain impact on the Vietnamese economy. Data from the General Statistics Office shows that economic growth in 1998 was only 5.76%, while inflation in 1998 was 9.2%.
However, due to the low openness and the active response from the country. Vietnam not only did not get caught up in a spiral but also overcame this crisis.
1998-2008: A time of price fever
The last years of the twentieth century and early twenty-first century marked Vietnam’s active economic integration, culminating in the signing of the agreement on joining the Vietnam-US Trade Agreement (2001) and the World Trade Organization WTO (2006). At that time Vietnam was considered as an economic “tiger” shortly, with GDP per capita reaching $ 396 (Laos $ 328, Cambodia $ 283) in 2000.
The market of the real estate in Vietnam started to change in 2000 and exploded in stage 2001-2002, with GDP growth of 6.79% in 2000 and 6.89% in 2001, respectively. The highest growth was in the years 2004-2007 when the average GDP grew by 8.23%. Thanks to the positive signals of the world economy, the expectation of the recovery cycle of the Vietnamese economy. Moreover, the water inflows outside continuously poured into the market.
The chart shows house prices by segment in Vietnam
State policies also contribute to boosting the market and fueling price fever. Prices and transactions in these years are increasing. But meanwhile, real estate in Vietnam has become an investment channel attracting many classes of people to participate.
With 2 housing fevers in 2001-2003 and 2007-2008, housing prices increased many times, completely out of the reach of people with low to moderate incomes in big cities like Hanoi city or Ho Chi Minh city.
The 2008-2018 period: Recession – Thawing – Recovery
In mid-2008, the economy plunged again, stemming from the global financial crisis which followed by the downturn cycle of the real estate market.
In Vietnam, real estate prices decline, estimated 30-40% in just a short time. Real estate inventory in 2012 amounted to over VND 100,000 billion. Bad debts of many real estate businesses are in danger of skyrocketing. Inflation really exploded, causing the State Bank to tighten monetary policy.
Since 2012, the State management agencies have tried to promulgate many policies and economic stimulus packages to attract investment and remove difficulties for the market. As a result, the market started to have positive changes.
The fact that businesses, especially businesses investing in the development of social housing projects, cheap commercial housing. There have reduced their financial obligations along with the VND 30,000 billion credit package, which has gradually helped the market. Vietnam’s real estate has gradually recovered, although real estate inventories are still abundant and have not been fully resolved. The market now has “warmed”, “thawed”, has a relatively strong upward trend.
Meanwhile, people interested in real estate have seen a boom in the high-end and resort segments. In which, the most impressive one is the real estate segment of the resort tourism. The second home creating a completely new look for provinces with favourable geographical and natural locations such as Ba Ria – Vung Tau, Phu Quoc, Da Nang, Thanh Hoa, Quang Ninh, Hai Phong …
Resort real estate image in Vietnam
From 2018 to present: Covid-19 and its challenges for real estate in Vietnam
The latest World Bank figures show that the Vietnamese economy has a strong foundation and high resilience. Thanks to domestic demand and export-oriented manufacturing that has remained high for the past two years.
According to preliminary data, real GDP increased by about 7% in 2019, close to the growth rate in 2018. And Vietnam is one of the countries with the highest growth rates in the region.
Due to the extensive economic integration, Vietnam was also heavily affected by the Covid-19 pandemic. However, the health impact of the epidemic is not as serious as in many other countries. Thanks to proactive countermeasures at both central and local levels. In the first quarter, the macroeconomy and the fiscal year were stable with estimated GDP growth of 3.8%.
The Asian Development Bank (ADB) forecasts that Vietnam’s GDP will grow by 4.1% in 2020. Although this figure is 0.7% lower than the April forecast of ADB. This is still the highest growth which expected in Southeast Asia.
The World Bank (WB) also forecasts that Vietnam’s GDP growth in 2020 will reach 3.0%. Besides, Expecting Vietnam’s economy to recover relatively quickly and will have a growth rate of 6.8% in 2021.