VN real estate 1H '24: Residential, no change. Office sector powers ahead with tech and R&D.

Much has happened in 1H ’24 in the political sphere, and frustratingly, very little in the approval of new residential project developments and much-needed commercial projects in the south. Some commentators are betting that slowing approvals will result in slow supply and thus must increase pricing in residential properties. With some deeper degree of latency, this has happened in previous cycles however our thoughts this time around is that lack of approvals also equals a challenging lack of pipeline for developers that are carrying large levels of debt that will need to be serviced.

Hanoi saw a small increase in sales in Q1 but tailed off again in Q2, so I am sticking to my note 12 months ago in this regard and this drop of activity is likely to be a slightly longer shake-out as we are coupled with the lead-up for the 2026 National Congress. New projects are indeed scarce, but for now, buyer confidence remains muted with our data showing intent for buy-to-live is back on the rise vs. BTL/investment purposes and the secondary market is still vibrant with attractive pricing.

Last month I was lucky enough to participate in Ho Chi Minh City Securities Corporation (HSC) 's recent investor conference where we touched upon the above frustrations of supply and ‘real’ demand for homes. The conference also hit upon a couple of other key themes, two of which stood out for me. The first is overseas investors are generally commenting that the Vietnamese Government needs to continue spending, and commit to it. Infrastructure is often mentioned but a focus is on secondary & tertiary education avoiding high potential Vietnamese talent leaving for overseas education or jobs and in the longer term the potential ‘middle-income trap’. If the number and the quality of investors present at the conference is anything to go by, Vietnam remains a darling and these comments from investors are words of encouragement rather than criticism. Knight Frank’s new enquiries for investment opportunities in Vietnam in the last quarter were over US$700m, whereas 12 months ago it was our only ever quarter with no new investment enquiries.

Linked to these overtures, comments came from an excellent panel on the tech sector identifying the importance of graduates and talent, which has been a known challenge for Foreign Invested Enterprises for the last 10 years and one that Vietnam has and is doing well to address. Relevance to real estate? HCMC’s office sector is experiencing significant levels of demand driven by tech and R&D with some truly massive and landmark leases already signed and other deals being inked.

Tech and R&D will be the dominant sectors of demand for deals in HCMC for the remainder of this year and will result in the largest year for the sectors by take-up.  These aren’t just big spaces, these are world-leading companies. The key trend is? Flight to quality; all deals are closed in buildings with green accreditation. The war for talent directly correlates to companies requiring a better work environment. How to attract these tenants/create these workplaces and strike the hot deals that are still happening? Talk to Leo Nguyen or me; we think it will remain an occupier favourable market for the next 18 months but an area with plenty of deal activity.

Best,   

Alex Crane

Managing Director