What does fast population growth in Vietnam have to do with real estate?

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Apparently, it is helping to pave the way for success in the property market

HCMC-real-estate-growth

All indicators are pointing to a strengthening real estate market in Ho Chi Minh City (HCMC) right now as a combination of population growth, urbanisation, a recovering economy and smart investment in infrastructure paves the way for credible development in the city, reveals a recent report by Savills.

The population has been growing at 3 percent per annum in the city since 2004, according to figures from the Vietnam General Statistics Office, while population density is twice that of Hanoi, with approximately 3,700 people per square kilometre. The population is forecast to continue growing at 2 percent per year between now and 2020.

Additionally the urban population of HCMC was estimated to be at 82 percent in 2014, significantly more than the national average of 33 percent.

More: Why District 2 is Ho Chi Minh City’s most desirable area

Households are getting smaller and younger, too. Around 55 percent of residents are below 30 years old, while the last eight years have seen household sizes decrease at an average of 0.8 percent yearly. Demand is certainly increasingly for housing supply in HCMC.

Government investment in infrastructure projects is also fuelling demand for housing in certain areas of the city – particularly in the eastern region.

Metro Line No. 1 is scheduled to begin functioning by 2020, linking the central districts to the eastern area, and is partially attributable to the rise in popularity of the region. The primary residential market in the east had approximately 10,000 transactions in the first half of 2015, taking 80 percent market share of total transactions.

Developments in this region are ramping up in accordance with demand, according to Savills. “While there may be periods of short-term oversupply with slower price appreciation, we expect good price growth as infrastructure continues to improve and more facilities and services are opened,” Neil MacGregor, managing director of Savills Vietnam, told Vietnam Net.

The prospect of more schools, hospitals, and international-standard shopping malls are all positive signals that will support the sustainable growth of the market. For better quality projects we have seen price increases of around 10 to 15 per cent in the last 12 months.”

More: When will foreign buyers start investing in Vietnam?

Looking at Vietnam as a whole, government policies such as the relaxation on foreign ownership introduced on 1 July 2015 may open the residential market even further and boost demand, while the Law on Real Estate Business has recently been amended to minimise the risks of buying unfinished housing units by ensuring projects satisfy certain criteria before launching. This should boost consumer confidence in the sector.

It’s not only individual investors getting excited about the growth opportunities offered by HCMC, according to The Straits TimesSingapore-based Maple Tree Investments officially opened SC VivoCity, a winning property at the Vietnam Property Awards, in the city recently.

“Vietnam is seeing fairly strong economic growth, especially compared with the rest of Southeast Asia. Income growth is strong with rising urbanisation and foreign direct investments,” explained Wendy Koh, chief executive officer for Maple Tree Investments, on their decision to choose a Vietnamese location for their project.

 

Image is by Ngô Trung and is used under a Creative Commons licence

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