Three bright spots of real estate in 2024

2023 is considered a "difficult" year for many real estate segments, but industrial real estate is still a bright spot because it records positive growth in supply, demand, occupancy rates, and rental prices.

FDI attraction in Vietnam in 2023 will reach 36.6 billion USD, according to the Foreign Investment Agency, Ministry of Planning and Investment. Of which, the real estate business ranked second with nearly 4.6 billion USD, accounting for more than 12.7% of the total registered investment capital. Many emerging localities in industrial real estate can be mentioned such as Thai Binh, Nghe An, Ba Ria - Vung Tau.

Data from Savills Research shows that in 2023, industrial parks across the country will have a high occupancy rate of over 80%, with key northern provinces reaching 83% and southern provinces reaching 91%. Savills said it has recorded an increasing number of inquiries and site surveys from multinational manufacturing, logistics and e-commerce businesses, indicating growing demand for industrial products.

Ms. Pham Ngoc Thien Thanh, Head of Research and Consulting, CBRE Vietnam, said that in the period of 2024-2025, industrial land rental prices are expected to increase by 6-10% per year in both the North and the South. Ready-built warehouse rental prices are forecast to increase slightly by 2-4% per year in the next two years. The operating situation is positive in the industrial land and factory sector with diverse demand from industries such as garment, pharmaceuticals, and electronics.

In addition to industrial real estate, real estate M&A (mergers and acquisitions) activities are also expected to be vibrant this year. A report by KPMG Auditing Company shows that by the beginning of the fourth quarter of 2023, real estate was the second largest sector in terms of M&A scale, accounting for 23% of the 4.4 billion USD in total market transactions. The average value of the deals reached the highest level in the past 5 years, three times higher than in 2022. The buyers were mainly large-scale foreign investors.

Cushman & Wakefield forecasts that a large amount of capital from foreign investors is expected to be completed and poured into the Vietnamese real estate market in the period of 2024-2026. Many transactions have been and are in the negotiation process with quite positive results. The investment goal of foreign investors is still to find clean land funds, good quality, real value as well as complete legal documents, with much development potential.

The housing segment is still an attractive choice for both domestic and foreign investors due to its attractive profitability. If 15 years ago, FDI capital only focused on high-end housing with familiar names such as Keppel Land, Capitaland, now the market has many new investors joining the game such as Lotte Group, GS, Sumitomo, Hong Kong Land... In addition, capital also tends to shift and increase in the industrial, hotel, office and retail real estate segments.

The housing market is expected to recover slowly, but supply has improved and demand remains strong. Data from the Vietnam Association of Realtors shows that the housing absorption rate has gradually increased over the quarters, especially in the second half of 2023. Total apartment and low-rise transactions in 2023 are equivalent to 2022, while 2022 started to face difficulties in the second half of the year. VARS assessed that this improvement comes from signs of market recovery, investors' goodwill to sell through unprecedented preferential policies and increasing supply towards the end of the year.

VARS experts said that the frequency of housing project launches in 2024 will be more regular and denser than last year with the introduction of new investors. Especially the end of the first quarter - the beginning of the second quarter marks the beginning of supply to the market. Of which, Hanoi is expected to welcome about 15,000 apartments and low-rise products.

In the South, Binh Duong will be a bright spot with about 10,000 new products launching for the first time. Meanwhile, Ho Chi Minh City will have about 5,000 new units, not including inventory products. VARS forecasts that total transactions for the whole year of 2024 will reach about 25,000 units with an absorption rate of 30-35%, mainly from actual buyers.

Ms. Duong Thuy Dung, CEO of CBRE Vietnam, assessed that people will have increased ability to buy houses in 2024 because investors will be cautious in increasing prices of new subdivisions. Housing projects do not reduce prices directly, but buyers still receive indirect discounts through discount policies, more attractive and flexible payment incentives. In addition, the secondary housing market in some areas will be more active because individual investors need to turn over capital, so they will reduce selling prices.