Rising demand compels a shift to affordable housing

Do Thu Hang, associate director of Advisory Services in Hanoi at Savills Vietnam Co., Ltd., said that affordable housing will likely receive the most attention in the Vietnamese property market next year. 

Next on the development list are the Grade B and A property segments, otherwise known as mid- and high-end housing, followed by condotels, shophouses, and officetels.

“Affordable housing, which costs approximately VND1 billion (US$45,450) per unit on average, will attract rising local demand, mostly from industrial park workers,” Hang told VIR at last week’s conference on the Vietnamese property market co-organised by VIR, Vietnam National Real Estate Association (VNREA), and Investor Magazine.

Vietnam currently has approximately 2.6 million IP workers, a number which is growing by an average of 200,000 workers per year. 

Around 75% relocate for employment, and the vast majority (three-quarters) are below 35 years old, with an annual average income of US$2,500.

“These factors are the fundamental support for the development potential of the affordable housing market in the time to come,” Hang said. “However, it will be local developers driving the segment, as foreign developers tend to focus on high-end projects.”

VNREA vice chairman Nguyen Manh Ha also forecasts that the segment will develop the most in 2017.

“Though the sales of these houses was already substantial last year, demand remains strong and there has been a big shortage of supply,” he said. “While investors are over-focused on developing high-end products, 70% of the market demand is centred on affordable houses.”

According to VNREA, affordable houses in the price range of VND15 million (US$682) per square metre are becoming scarce.

Meanwhile, segments, such as high-end and hospitality, are also forecast to continue developing next year, but not as strongly. Their supply has already exceeded demand, according to Ha.

It is estimated that high-end apartments currently occupy 39% of the overall supply, up from 24% in 2013.            

Nguyen Quoc Hiep, chairman of GP Invest Group, said that next year his firm will develop three major high-end projects. “The market will develop more strongly next year thanks to the economic recovery, leading to bigger demand for high-end property products,” he said.

Nguyen Thi Hong Lan, PR and brand representative for GFS Group, told VIR that they will develop a high-end project next year in Hanoi’s Cau Giay district.

In 2016, GFS completed two high-end projects in Hanoi’s Kim Giang and My Dinh areas, with the total apartment and villa units numbering over 1,000. “We have sold off all of them,” Lan said.

However, VNREA warns that if investors continue building massive high-end developments, there may be a surplus which will make it difficult for them to sell.

But the country’s rising wages have proven too great a temptation for many investors. “In addition to high-end apartments, the hospitality property segment is also predicted to further develop next year, due to rising incomes,” Ha said.

For example, in the south-central city of Danang, luxury resorts and hotels have been developed in great numbers by big investors, such as Vingroup, SunGroup, HB Group, and Novaland.

Such projects have also been built in the south-central city of Nha Trang, including Vinpearl Beachfront Condotel, Vinpearl Resort & Villas-Nha Trang, and Movenpick Cam Ranh Resort.

On the southern island of Phu Quoc, luxury projects, such as Premier Village Phu Quoc Resort and Condotel Residences Phu Quoc Emerald Bay, have risen.