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Vietnam Real Estate Investment Market Outlook and Trend Analysis in 2019

Posted by Harry Nguyen on 09/24/2019
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In 2018, Vietnam’s real estate regulations opened up the third year for foreigners to invest in real estate. The housing prices are gradually rising, and the rental field in Hanoi and Ho Chi Minh is also very bright. This attracts more foreign capital into Vietnam’s real estate investment. 2020 is coming, I believe that the most important thing for investors is the Vietnam real estate market.

Whether the current real estate price in Vietnam has a bubble crisis must be the topic that everyone is most concerned about. The following is an analysis of the trend of Vietnamese real estate market and Vietnamese real estate investment:

Vietnam real estate outlook and investment trend

Vietnam real estate outlook and investment trend

Before analyzing the 2020 Vietnamese real estate market, let’s review the evolution of the Vietnamese real estate market in the past three years:

Vietnam Real Estate in 2015-2017 Review

In 2015, after the Vietnamese government opened up foreign investment in Vietnamese real estate. It showed a mild and optimistic upward trend in 2015-2017, and house prices rose by 10-15% per year. The mortgage interest rate is 7-13%. The rental rate is about 6%.

The Vietnamese dong exchange rate with the US dollar is also due to the gradual strengthening of the Vietnamese economy, and the depreciation is not strong. The interest rate has depreciated by 10-15% in total in three years.
The stock market also rose, especially in 2017, the Vietnamese stock market rose by 50%, ranking second in the global countries, second only to Argentina.

Vietnam Real Estate in 2018 Review

In 2018, it was the most amazing year after the Vietnamese government opened up foreigners to invest in Vietnamese real estate. The government’s related facilities were gradually improved, and a large amount of foreign capital poured into the investment of Vietnamese real estate. In 2018, the average increase in real estate in Vietnam was close to 30%. And several hot spots in Hanoi even had an amazing 50% increase. The mortgage interest rate is 7-13%. Rents rose slightly and the rental yield was about 7%.

The Vietnamese dong exchange rate with the US dollar is also due to the gradual strengthening of the Vietnamese economy. The depreciation is not strong, and the interest rate depreciates by 5%.

Vietnam Real Estate in 2019 review

The stock market also continued to rise, but affected by the global stock market retracement from October to December, the stock market rose less than 1% for the whole year.
In 2019, the Vietnamese real estate market was affected by the global financial environment. The following three analyses of the three black swans and three white swans that affect the investment in property in Hanoi and Ho Chi Minh:

I. Sino-US trade war triggered global economic turmoil

The general trend of global financial news in 2018: the Sino-US trade war triggered by US President Trump has been analyzed as the biggest black swan in the financial market in 2019. Under the protectionist tariff barrier, the trade share has declined, and the real estate has been affected. Willingness to invest.

 

Stocks Analysis in 2018

The world’s major stock markets were affected by the Sino-US trade war

II. US FED continued to raise interest rates and shrinkage of raw materials prices

The US economy continued to perform well, and the Fed continued to shrink in 2018-2019, and the cost of raising interest rates increased.
The prices of raw materials and bulk commodities have always been linked to the boom. The raw materials and stock market reversals have been interpreted by most analysts as a slowdown in investment. And their investment power has been greatly reduced. Cash is king.

 

(oil price and US stocks comparison chart)

III. Vietnam’s real estate growth is too large in 2018

As the saying goes, rising is the biggest bad, the increase is too large, investment shrinks. In 2015, the price of the construction of the company was from 1400-3000 US dollars / square meter, and by the end of 2018, the price has risen to 2600-12000 US dollars / square meter.

In addition, the builders implemented two prices for foreign investors, and the contract price for foreigners ranged from 5-8% to the nationals. It also compresses the future gains.
After seeing three black swans, we don’t have to feel too pessimistic, because Southeast Asia’s outlook is good news, at least three big profits.

  • Southeast Asia is the biggest winner of the Sino-US trade war
    History tells us that the biggest winner of the Second World War was the United States. The biggest winners of the Korean War and the Vietnam War were Taiwan and the Philippines. The biggest winner of the trade war between China and the United States, which is not bloody, will be Southeast Asia. Even Vietnam, which is close to China, is seen as the most likely to receive China’s outbound factories and production capacity; and investment funds continue to flood.
  • Real estate cycle is long
    Unlike the stock market and the raw material cycle, which is about five years old, the real estate cycle is known for its long time. From 2003 to 2015, Taiwan’s long-term growth in the past 12 years, more than doubled. From 1997 to 2018, China was mostly in the past 20 years, and some cities rose nearly ten times. Prove that real estate will not be affected by the short-term economic downturn. But the longer the time, the higher the multiple of the increase, it is worth the long-term investment.
  • Large land demand. Real estate is a booming locomotive. Before all developments in various industries, infrastructure construction is needed, which will make land resources increasingly scarce and cause rise.

The above-mentioned Chinese outbound factories have made Vietnam’s larger industrial land, rising by 50% in a few months. Other logistics, business, and industrial land demand have also increased substantially. If the government can increase infrastructure, it can expand the city, resulting in long-term profitability of real estate.

Investment conclusion:

According to the above three big profits, for the 2019 Vietnam real estate, we continue to hold an optimistic and stable view, and do not need to worry about excessive foaming.
It is estimated that the real estate market in Vietnam is expected to stabilize and shrink in 2019, and the price rises and falls between 0-10%.

For the regional analysis, we are optimistic about the areas with compensatory market conditions:

  • Property investment in Hanoi.
  • Property investent in Ho Chi Minh City.

Instead, investors need to have the concept of asset allocation. In the crisis of stock market and raw materials falling, they will allocate relatively stable real estate assets. Then they carefully select lots and continue to hold high-quality Vietnamese real estate.

  1. Investors who have already bought: Existing assets are continuously held, and new targets can be carefully selected.
  2. Investors who have not yet bought: Do a good job in asset allocation, choose a quality location or be optimistic about regional purchases with ups and downs.

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