Which real estate segment benefits from macroeconomic indicators

Powerful foundation

Real estate is an important sector for the economy. According to a study just published by the Real estate Training and Research Institute in Vietnam, the real estate market contributed 7.62% to GDP in 2019. If land was considered as the capital factor, the real estate (including expanded real estate + real estate according to ISIC in 2019) accounted for 13.6% of GDP.

When the real estate industry grows, it not only benefits itself but also creates spillover effects to the national economy. On the contrary, the general stability and growth of the macro economy is also an important impulse, creating a foundation for the real estate market. That's why most experts say that when the Covid-19 epidemic ends, the economy recovers and grows again, real estate will be the fastest recovering industry.

With the Government's great efforts in directing and stabilizing the macro-economy, in the fourth quarter of 2020, our economy recovered rapidly with a growth rate of 4.48%, pushing GDP of the whole year up 2.91%. This is the highest growth rate in the world in the context of being affected by the Covid-19 epidemic. At the same time, this increase contributes to GDP growth of 5.9%/year in 5 years on average.

Along with positive economic growth, in 2020, Vietnam achieved "dual goals" with impressive results. FDI as of October 20, 2020 reached USD 23.48 billion, equaling 80.6% over the same period in 2019. Total export turnover was estimated at USD 543.9 billion (up 5.1% compared to 2019), export surplus reached  USD19 billion, the highest in the past 5 years.

In addition, one of the national advantages of Vietnam is the political stability that helps the country be in peace and prosperity. This is a guarantee for consistent economic policy implementation, which is expected by investors and businesses at all times. According to the brand valuation firm, Brand Finance (UK), in 2020, Vietnam's national brand value has grown the most in the world with USD319 billion and is at 33 position in the Top 100 most valuable national brands in the world (up 9 positions compared to 2019, valued at USD247 billion, ranked the 42nd).
 

When the real estate industry grows, it not only benefits itself but also creates spillover effects to the national economy. On the contrary, the general stability and growth of the macro economy is also an important impulse, creating a foundation for the real estate market.

The economic expert, Assoc.Prof.Dr. Dinh Trong Thinh assesses that Vietnam's efforts in epidemic prevention and control have been recognized by the whole world. According to the expert, new macroeconomic impulses have a positive impact, opening the recovery momentum and a new growth cycle of real estate in the next quarters of 2021.

“This is a bright spot of Vietnam that is highly appreciated by the international community and will be a factor promoting investors back to the market. Cash flow will be more vibrant and flexible. We hope to attract investment capital from shifting production in the world. The FDI index will increase and become better and better," said Mr. Thinh.

In addition, according to the expert, when production and business develops again, people's living standards are also improved, and higher income levels will stimulate demand to come back, especially large demand on real estate.

“In the first and second quarters of 2021, many countries around the world may still be in trouble, many economies are still closed, but in Vietnam, the domestic consumption will increasingly expand, and the spending needs will increasingly increase. Investors will pour more capital into the real estate market, the most obvious manifestation is that real estate prices in many areas at the end of the year are on the verge of increase," said the expert.

Ms. Hoang Nguyet Minh, Deputy Director of Savills Hanoi Investment Consulting also gave optimistic forecasts about the real estate market based on positive macroeconomic indicators:

“In the coming time, when the macro indicators are guaranteed and the epidemic is controlled, the real estate market will develop better than 2020, even potentially flourishing in certain segments and areas".

Mr. Nguyen Van Dinh, Deputy General Secretary of the Vietnam National Real Estate Association also said that the real estate market in 2021 was unlikely to have the risk of a crisis, virtual or bubble situation, but it would develop more stably and sustainably than 2020; prices were likely to be increased by more than 10%. The basis of these statements, according to Mr. Dinh, was also because the Vietnamese economy could keep pace and achieve a better growth rate, leading to an increase in demand for housing and investment.
 

Two segments will "shine" in the real estate market in 2021

According to experts, looking at current macroeconomic indicators, especially the FDI index and the interest of foreign investors in the Vietnamese market, as well as the trend of production movement with the name of China +1, the industrial real estate and tourism and resort real estate will be the two brightest segments in real estate market in 2021.

With the industrial real estate segment, experts forecast that from the reversal in 2020 – when the whole market is difficult, this segment will still grow quite well, and industrial real estate will make strong breakthrough in both supply and demand in 2021. Accordingly, the industrial real estate market has also been formed more clearly with the increasing participation of real estate investors. In the first 11 months of 2020, the industrial real estate sector together with the retail industry accounted for one third of the total of more than 100 foreign investment projects in real estate. At this time, industrial park developers are also "actively" developing land funds to serve future land rental demand.

“Industrial real estate is a bright spot thanks to the advantage of the Free Trade Agreement and the US-China trade tension. The planned industrial parks are expected to be the those to attract cash flows in the coming time," said Ms. Hoang Nguyet Minh.

According to Mr. Nguyen Tho Tuyen, Chairman of BHS Group, in the face of new investment waves, industrial real estate in 2021 would develop according to a new trend.

“In the past, industrial parks did not have the synchronization between production, accomodation and entertainment places. The investors were "professional infrastructure levelers". However, the current demands have changed, which is synchronization for convenience in work, improvement of life quality and long-term stability. Therefore, new products need to be synchronously planned on a large scale, including production places, accommodation, healthcare, education, service places, etc., even Dry Port. To do so, investors need to become professional industrial real estate developers," emphasized Mr. Tuyen.

According to the information from the Economic Zones Management Department under the Ministry of Planning and Investment, the lease demand for land, factories and warehouses has increased dramatically, causing rents in industrial parks near big cities to escalate. In the South, land rents in industrial zones in 2020 reached USD147 per square meter in Ho Chi Minh City, USD107 per square meter in Binh Duong, USD98 per square meter in Dong Nai, USD123 USD per square meter in Long An and USD65 per square meter in Ba Ria - Vung Tau. In the North, rents was up to USD129 per square meter in Hanoi, USD95 per square meter, USD83 per square meter in Hung Yen, USD76 per square meter in Hai Duong and up to USD96 per square meter in Hai Phong. This is also a sign that industrial real estate will have strong growth in 2021.

In addition to the prospect of industrial park real estate, experts assess, real estate serving the resort model combining tourism, entertainment and on-site healthcare has the opportunity to recover and thrive strongly in the near future. Accordingly, the development of the "staycation" model is a solution to the current business problem. Real estate projects that are synchronous in terms of services, culinary experiences, entertainment and health care are attracting domestic customers well.

“In the past, investors focused on the vacation needs of guests while this behavior occurs with very little frequency in a year. This led to excess supply and low exploitation rate. Therefore, the resort product line is making a very significant change. Products are required to be in places with beatiful scenery, terrain, good weather, unique culture, etc., and especially can be owned for a long time and reached by personal means of transport, "said expert Nguyen Tho Tuyen.

In addition, economic experts confirms that this year, tourism real estate is not only towards the sea but also spreads to the mountains and forests. Real estate businesses are tending to centrifuge, shift, and strongly redirect investment in the peri-urban markets of Hanoi, Ho Chi Minh City and the central area of potential new markets including Ha Long, Hai Duong, Binh Dinh, Quang Binh, Kon Tum, Dong Thap, Soc Trang and Bac Lieu.

The market has also been recording the appearance of large-scale tourism and entertainment complexes with diverse types of real estate and culinary, entertainment, spa and even schools, hospitals, etc., to ensure all needs of tourism, relaxation and entertainment for many groups of tourists and local residents. This is also the model at which many visionary real estate enterprises are aiming.