It’s no secret that the Vietnam property sector trails behind its ASEAN peers. Thailand, Indonesia and Malaysia all enjoy domestic demand and consistent international interest that allowed the real estate industry in these countries to grow. However, Vietnam is now working to close that gap.
The second home market, in particular, is seen as vital for the growth of the Vietnam property sector. A number of ASEAN countries have had success in building the second home segment which has elevated those real estate markets as a whole. Even if Vietnam currently trails countries like Thailand and the Philippines, it is well positioned to learn from its neighbors.
“Vietnam’s property market, generally speaking, is claimed to be 10-15 years behind Thailand, Malaysia and Indonesia. The second home market only started to develop during the last couple years and is probably the furthest behind. On the bright side, there are a great deal of lessons and experiences that we can take from our pioneer neighbors,” Nguyen Hoang, Director of the R&D Department at DKRA Vietnam, explained.
A strong tourism industry could also help Vietnam establish itself as a renowned second home destination. Hoang noted that tourism has significantly increased during the past five years with the country welcoming 18 million international visitors in 2019. COVID-19 will see that number to decrease in the short term, but the long-term tourism outlook remains positive.
“In the coming years, I think the Vietnam hospitality and tourism sector will catch up with neighboring countries such as Thailand, Malaysia and Singapore. The presence of well-known, international brands like Hilton, Sheraton and Accor have already brought credibility to tourism in the country,” Hoang stated.
The Vietnam property sector welcomes hospitality
One of the most recent trends in the Vietnam property sector has been the rise of hospitality real estate. Driven by the country’s rapid growth of middle-income and high-net worth individuals, a significant number of hospitality-focused projects were launched between 2015 and 2019.
“The Vietnam hospitality property market witnessed dynamic movement during recent years with a large supply of projects launched. There have been thousands of beachfront villa/townhouses as well as 10,000-12,000 condotel units launched annually. Reputable developers of the segment include Vingroup, BIM Group, CEO Group and Sun Group,” Hoang reported.
He continued, “Facilitated by the sector’s vigorous development, asking prices have grown dramatically. As a result, it is now pretty easy to find beachfront villas listed for sale at one million dollars or more.”
According to Hoang, the most popular locations for hospitality properties are along Vietnam’s central coast with Da Nang and the provinces of Quang Nam, Khanh Hoa and Binh Thuan all seeing a lot of real estate activity. In the south, Phu Quoc Island is an up-and-coming destination. Meanwhile, the Ninh Thuan, Phu Yen and Binh Dinh provinces are now starting to establish themselves as emerging markets.
Foreign ownership could unlock greater demand
Many developers in Vietnam have been encouraging the government to loosen foreign property ownership regulations in order to attract more overseas buyers. Current laws state that international buyers cannot hold more than 30 percent of the units in a single residential building. Additionally, buildings must be approved for foreign ownership by the government before sales begin.
Overseas buyers are currently unable to own hospitality property in Vietnam, but this could be set to change.
“Recently, the Ministry of Construction proposed that foreigners be allowed to buy hospitality properties like beachfront villas, townhouses and condotels. This is something most experts believe to be in the best interest of the Vietnam property sector,” Hoang said. “I suppose that this is a good suggestion that can not only boost the hospitality property sector, but also increase the competitiveness of the Vietnam real estate industry as a whole. Through this, the trend of worldwide integration would be proven and implemented.”
Should international property buyers be allowed to acquire hospitality properties in Vietnam, a place such as Da Nang could compete with Bali, Phuket and Cebu in Southeast Asia. Especially when you consider that most hospitality projects also have familiar rental schemes and other mechanisms in place to provide investment returns.
It may not be there yet, but the Vietnam property sector is closing the gap on its regional neighbors.
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About DKRA Vietnam
DKRA Vietnam is a leading broker agency and property consultant in Vietnam. The company provides a wide range of services including market research, project development consultancy in hospitality and residential property, sales and marketing and property management.
For more information, please visit: www.dkra.vn