Vietnam - where is the real estate cash flow heading in 2021?
2020 has been a turbulent year for the real estate market caused by the unexpected and devastating pandemic, thus the question of which directions, types and sectors is the real estate cash flow heading in 2021.
According to Tran Thi Thu Hien, Director of DTJ Investment and Distribution Co., a principle in real estate investment is that where there are high ROIs, there is cash flow. Recently, the economy has faced many difficulties and challenges due to the negative impacts of Covid-19. However, the country’s ability to control the spread of the virus has led to positive sentiment among real estate investors - an important factor in investment. Therefore, many investors have chosen Vietnam as the destination to invest.
There are other factors supporting investment into Vietnam economy such as stable exchange rate, increasing foreign exchange, supportive government policies introduced to citizens and businesses suffering negative impacts of the pandemic. The real estate market will probably rebound and early next year thanks to strongly pent-up demand.
In such difficult economic conditions, affordable residential properties are more likely to have good liquidity, while high-end apartments may perform weaker unless there are new breakthroughs attracting cash flow. Investors’ decisions on second homes, vacation properties, investment properties of high value will be slower, and only existing and differentiated products will be highly liquid. It is the investors, not anyone else, who screen and scan the investment products for themselves.
Besides, Ms. Hien stated that the developers’ reputation, as well as product quality will place important roles on investors’ decisions. Another significant factor is technology. Real estate products with cutting-edge technology are more appealing to investors.
Commenting on the potential market segment in 2021, Mr. Bui Van Doanh, Director of the Vietnam Real Estate Research Institute, said that land plots remain the most attractive segment in the coming period, especially those in new tourist destinations. Once the global pandemic is under control, tourism and airlines are among those receiving major boosts in demand. Therefore, in the near future, the hotspots of the property market in Vietnam are widely - recognized tourist destinations such as Phan Thiet (Binh Thuan Province), Ninh Thuan, Quy Nhon (Binh Dinh Province), Buon Me Thuot, etc.
In addition to land plots in tourist destinations, industrial real estate will thrive significantly in the coming year. After the US – China trade war, Covid-19 spurred a trend of faster production relocation from China, and Vietnam continues to be a great destination for cash flow thanks to its advantages of location, land availability, welcoming policies and labor resources. The economic recovery and expansion of domestic businesses when the pandemic is under control are also among the main motivators driving the development of industrial real estate.
Mr. Doanh emphasized that in order to invest safely, investors need to carefully learn about the local law, planning, liquidity as well as balance their financial capacity. In the industrial real estate segment, investors need stable capital and networking ability to form business alliances.
Dr. Can Van Luc, Member of the National Financial - Monetary Policy Advisory Council, BIDV Chief Economist commented that in the future, vacation properties will have good growth momentum. At present, after a period of hot and spontaneous development, this segment shows signs of deceleration and slowly enters the market correction stage. Covid-19 is an additional hit which leads the vacation properties market into a quieter period, but it is also a chance for this segment to continue its market correction.
In the long term, vacation properties remain a potential segment for 3 main reasons. Firstly, ministries and local authorities are changing and adjusting to make supply and demand more reasonable and compatible with planning. Secondly, Vietnam's tourism industry has become a key economic sector, contributing about 9.2% of GDP and possibly up to 12-14% of GDP by 2025 according to the tourism development strategy that the Prime Minister has issued earlier this year. Finally, the second-home trend has been gaining ground since the outbreak of the pandemic. With the above mentioned, investors interested in vacation properties need stable capital and perseverance to remain in the segment.