If the next wave of the COVID-19 pandemic continues to spread to the 3rd quarter, market growth in the last 6 months of the year will stall as more businesses gradually falter. Limited income sources, an issue which impacts the majority of the market at this time, leaves the market flattened. Transactions are mainly directed at long-term investments.
.png)
Graph 1: Supply and consumption level for real estates in Ho Chi Minh City from Q2/2020 to Q2/2021 (source: DKRA Vietnam)
As supply decreases, price increases
As shown by the report on the residential property market in Ho Chi Minh City and its vicinity in the second quarter of 2021 by DKRA Vietnam, the 4th wave of the pandemic has led to most provinces across the country having to apply strict social distancing measures. Therefore, movements in the real estate market were mainly recorded in April and early May. Notably, there was a significant decrease in supply and consumption levels in the segment for apartments. As for the resort real estates segment, DKRA Vietnam reported positive signs at the end of the first and the beginning of the second quarter of 2021, with a strong increase in supply in the condotel, townhouse and coastal shophouse segments. However, the surge of cases has left a big impact on the recovery momentum of this segment.
In Ho Chi Minh City, with less and less sources of new supply, the primary price level of all segments has increased. Apartments in Ho Chi Minh City and neighboring provinces recorded a slight decrease in supply and consumption level compared to the first quarter of 2021, specifically, supply level decreased by 28% while consumption level decreased by 26%. Primary prices in Ho Chi Minh City, however, increased by 3-5% in the first half of the second quarter, due to the fact that the projects introduced to the market were mainly in the latter stages, nearing completion or were projects with synchronous planning and construction.
Similarly, new supply of townhouses and villas recorded a sharp decline due to the prolonged social distancing period. Because of this, pricing level increased for some projects in the primary market, especially in Ho Chi Minh City. Meanwhile, the secondary market did not record much changes.
Mr. Su Ngoc Khuong, Senior Director at Savills Vietnam, states that in the first half of the year, the market in the southern end only saw a few new projects in Ho Chi Minh City (in the mid to high-end and high-end segments) and neighboring provinces such as Binh Duong, Dong Nai. Many projects were planned to launch this year, but due to the impact of the pandemic, had to be re-scheduled. However, despite struggling with many challenges under the pressure of the pandemic, Mr. Su considers this to only be a short-term stagnation of the domestic real estate market.
According to data from Batdongsan.com.vn, in May 2021, other than the market segment for apartments, which attracts buyers with real demand for housing, other segments did not record much change, as demand for land plots and townhouses targeted for investment is impacted by COVID-19. The total number of listings for sale in Ho Chi Minh City decreased by 7%, the number of customers interested in buying real estates decreased by 6% compared to data in April. Categorically, the number of listings for land plots decreased by 16% and demand dropped by 18% in just one month during the latest COVID surge. Ground projects recorded the most drastic changes, with 24% less listings and a 29% drop in buying interest.
Leaders of the Ministry of Construction expressed, the real estate market poses many hidden risks which need to be actively monitored and movements closely followed, so that solutions to ensure sustainable market development can be proposed and actioned on in a timely manner.
A difficult recovery
From now until the end of the year, Mr. Su Ngoc Khuong predicts that the real estate market will not see many breakthrough changes, as the Vietnamese economy is still struggling to recover from the damages caused by the pandemic. Moreover, restricted income sources for the majority of the community at this time means that the market will rather stay flat. The majority of transactions will come from long-term investors, he asserts.
DKRA Vietnam forecasts the majority of the market segments will maintain new supply level equivalent to that of the first 6 months of 2021. Nevertheless, supply for apartments may increase slightly. New supply of land plots will mainly be concentrated in provinces neighboring Ho Chi Minh City. Overall demand may recover in the last months of the year after the pandemic is brought under control. Projects which have completed legal procedures and infrastructure continue to attract the interest of consumers.
Ms. Nguyen Thu Huong, General Director of Van Phuc Land, comments on the difficult first 6 months of the year where two consecutive and prolonged pandemic waves have resulted in botched plans and projects for real estate companies. She predicts 2 possible market scenarios in the last 6 months of the year. The positive scenario is that the market will partially recover in the middle of the third quarter and thrive in the fourth quarter, assuming that at least 50% of the population and 100% of real estate workers are vaccinated. The market in the last 6 months of the year has the potential to grow at 25-30% compared to the first 6 months of the year. This ideal rate is expected to be achieved with the condition that real estate companies accelerate at the maximum rate to compensate for loss in the first 6 months of the year.
The negative scenario is that the whole third quarter will be taken up to curb the wave of the pandemic, and vaccinations are only adequate to be distributed to less than 30% of the population. Real estate companies, therefore, will have less than 50% of its employees vaccinated. Market growth in the last 6 months of the year, in this case, will not be positive due to the fact that businesses will gradually exhaust all of their resources. Keeping the organization running already is a burden too difficult to bear; cancelled business plans also leads to revenue dropping considerably. The market will find it difficult to grow above 20% compared to the first 6 months, if the necessary means of support is not provided in time of need.
Graph 1: Supply and consumption level for real estates in Ho Chi Minh City from Q2/2020 to Q2/2021 (source: DKRA Vietnam)
As supply decreases, price increases
As shown by the report on the residential property market in Ho Chi Minh City and its vicinity in the second quarter of 2021 by DKRA Vietnam, the 4th wave of the pandemic has led to most provinces across the country having to apply strict social distancing measures. Therefore, movements in the real estate market were mainly recorded in April and early May. Notably, there was a significant decrease in supply and consumption levels in the segment for apartments. As for the resort real estates segment, DKRA Vietnam reported positive signs at the end of the first and the beginning of the second quarter of 2021, with a strong increase in supply in the condotel, townhouse and coastal shophouse segments. However, the surge of cases has left a big impact on the recovery momentum of this segment.
In Ho Chi Minh City, with less and less sources of new supply, the primary price level of all segments has increased. Apartments in Ho Chi Minh City and neighboring provinces recorded a slight decrease in supply and consumption level compared to the first quarter of 2021, specifically, supply level decreased by 28% while consumption level decreased by 26%. Primary prices in Ho Chi Minh City, however, increased by 3-5% in the first half of the second quarter, due to the fact that the projects introduced to the market were mainly in the latter stages, nearing completion or were projects with synchronous planning and construction.
Similarly, new supply of townhouses and villas recorded a sharp decline due to the prolonged social distancing period. Because of this, pricing level increased for some projects in the primary market, especially in Ho Chi Minh City. Meanwhile, the secondary market did not record much changes.
Mr. Su Ngoc Khuong, Senior Director at Savills Vietnam, states that in the first half of the year, the market in the southern end only saw a few new projects in Ho Chi Minh City (in the mid to high-end and high-end segments) and neighboring provinces such as Binh Duong, Dong Nai. Many projects were planned to launch this year, but due to the impact of the pandemic, had to be re-scheduled. However, despite struggling with many challenges under the pressure of the pandemic, Mr. Su considers this to only be a short-term stagnation of the domestic real estate market.
According to data from Batdongsan.com.vn, in May 2021, other than the market segment for apartments, which attracts buyers with real demand for housing, other segments did not record much change, as demand for land plots and townhouses targeted for investment is impacted by COVID-19. The total number of listings for sale in Ho Chi Minh City decreased by 7%, the number of customers interested in buying real estates decreased by 6% compared to data in April. Categorically, the number of listings for land plots decreased by 16% and demand dropped by 18% in just one month during the latest COVID surge. Ground projects recorded the most drastic changes, with 24% less listings and a 29% drop in buying interest.
Leaders of the Ministry of Construction expressed, the real estate market poses many hidden risks which need to be actively monitored and movements closely followed, so that solutions to ensure sustainable market development can be proposed and actioned on in a timely manner.
A difficult recovery
From now until the end of the year, Mr. Su Ngoc Khuong predicts that the real estate market will not see many breakthrough changes, as the Vietnamese economy is still struggling to recover from the damages caused by the pandemic. Moreover, restricted income sources for the majority of the community at this time means that the market will rather stay flat. The majority of transactions will come from long-term investors, he asserts.
DKRA Vietnam forecasts the majority of the market segments will maintain new supply level equivalent to that of the first 6 months of 2021. Nevertheless, supply for apartments may increase slightly. New supply of land plots will mainly be concentrated in provinces neighboring Ho Chi Minh City. Overall demand may recover in the last months of the year after the pandemic is brought under control. Projects which have completed legal procedures and infrastructure continue to attract the interest of consumers.
Ms. Nguyen Thu Huong, General Director of Van Phuc Land, comments on the difficult first 6 months of the year where two consecutive and prolonged pandemic waves have resulted in botched plans and projects for real estate companies. She predicts 2 possible market scenarios in the last 6 months of the year. The positive scenario is that the market will partially recover in the middle of the third quarter and thrive in the fourth quarter, assuming that at least 50% of the population and 100% of real estate workers are vaccinated. The market in the last 6 months of the year has the potential to grow at 25-30% compared to the first 6 months of the year. This ideal rate is expected to be achieved with the condition that real estate companies accelerate at the maximum rate to compensate for loss in the first 6 months of the year.
The negative scenario is that the whole third quarter will be taken up to curb the wave of the pandemic, and vaccinations are only adequate to be distributed to less than 30% of the population. Real estate companies, therefore, will have less than 50% of its employees vaccinated. Market growth in the last 6 months of the year, in this case, will not be positive due to the fact that businesses will gradually exhaust all of their resources. Keeping the organization running already is a burden too difficult to bear; cancelled business plans also leads to revenue dropping considerably. The market will find it difficult to grow above 20% compared to the first 6 months, if the necessary means of support is not provided in time of need.
Duy Quang
Tien Phong News
Tien Phong News