Key trends reshaping the real estate market

Speaking at TheLEADER's conference on “The new era of real estate growth: From volume to value”, country head of JLL Vietnam emphasized that in the near future, Vietnam real estate will be affected by five main trends.

The first trend is that apartment shifts to a more sustainable mode.

According to JLL’s representative, in the first nine months of 2018, 89 per cent of new launches comes from mid-end and affordable segment. "We will see a shift to a more sustainable mode, meaning more apartments for middle- and low-income people,” said he.

In Ho Chi Minh City, there are only 17 apartments per 1,000 persons, which is much lower compared to other Southeast Asian cities such as Jakarta, Bangkok, Manila.

The price to income ratio in Ho Chi Minh City is also the lowest among other Southeast Asian cities including Kuala Lumpur, Bangkok, Singapore, Jakarta and Manila.

“If the ratio is high, we should invest in in high-end apartment and if it is low, we should focus on mid-end segment,” recommended Stephen Wyatt.

In addition, there is an increasing number of nano unit.

Country Head of JLL Vietnam said: “About ten years ago, there were 120 square metre two-bed room apartments but now, there is no more over 100 square metre - apartment having two bed rooms. The demand for apartment size of buyers and developers has changed so we will see that the apartments will be smaller, especially in the centre of city.”

Moreover, intergrated-city appears to boast a huge community. For example, Phu My Hung urban complex constructed in about 20 years ago was invested heavily in infrastructure, landscapes, which have brought long-term returns.

"Investing in the landscape, having a master planning and finishing the infrastructure will create good results for real estate developers,” said the foreign expert.

A second trend is flex-space what is any space (desks or more comprehensive office space) provided on short-term leases, at variable prices or alternatively on a membership basis.

According to JLL, flexible space in Ho Chi Minh City totaled approximately 35,500 square metres as of first three quarter of 2018. Flexible space compound annual growth rate (CARG) is 26 per cent from 2014 to 2017.

The third trend is tech firms that are transforming the office landscape.

“Ten years ago, Google had only 25 employees in Singapore but now, it has about 1,000 persons here. In the last 10 years, Internet companies like Google, Amazon and Facebook have expanded into the Southeast Asia. At pace with the global trend, international and local coworking companies are rapidly increasing their presence.”

"Technology companies are emerging in Vietnam and this is a very good thing, showing that Vietnam is moving up in the value chain of real estate. Compared to some other regional countries, Vietnam is having higher growth rate of office space leased by technology companies,” explained JLL’s representative.

The fourth trend is e-commerce that changes industrial, office and retail landscape. JLL emphasized that it is the most influential trend to real estate in the coming years.

It came from the fact in 2017, Vietnam’s smartphone penetration was 84 per cent, meaning that 84 per cent of people were using smartphones amongst mobile phone users in key cities. Millions of Vietnamese people are purchasing via e-commerce.

According to Stephen Wyatt, industrial and logistics factor is the last trend having impact on Vietnam real estate.

Country Head of JLL Vietnam emphasized that to get the opportunity from these trends, Vietnam would face some challenges among which infrastructure is considered to be the biggest one, requiring major investment.

In addition, there is improving but still inefficient process of trading across border. The business environment is improving but the ease of doing business is not good.

Moreover, Stephen Wyatt insisted that Vietnam will face challenges from the surge of tourism industry because of continual growth in international tourist arrivals.

This will increase the demand and supply of hotel rooms. It is estimated that there are about 25,000 of branded and international-grade hotel rooms to open in Ho Chi Minh City, Hanoi, Danang, Nha Trang and Phu Quoc over the next three years, accounting for 56 per cent of existing hotel rooms in the market.

In addition to the traditional hotel model, there is a boom in hotel accommodation and recent demand for a new lifestyle hotel associated with increasing technology. "Vietnam needs to improve its aviation infrastructure and visas in order to continue to grow tourism," said Stephen Wyatt.