The value of the world’s real estate reached a record high of US$326.5 trillion in 2020, a 5% increase on 2019. Residential, the largest real estate sector, drove growth and accounted for 79% of the world’s real estate value.  Its value increased 8% in 2020 to reach US$258.5 trillion.

Real estate accounts for the lion’s share of global wealth. It is more valuable than all global equities and debt securities combined; it is worth almost four times that of global GDP.  The value of all gold ever mined is equivalent to just 4% of the value of global property.

“With limited alternative investment vehicles then Vietnamese property will continue to do well.  Despite Covid, in H1 2021 there were nearly 500,000 new stock market accounts, growing by 270% YoY.  The domestic economy continues to grow, with equity build up and the wealth effect transferring through to the broader economy.  Property will continue to be a favoured investment class.”  Troy Griffiths, Deputy Manging Director, Savills Vietnam.

Residential real estate

China has the world’s largest and most valuable residential market - accounting for 30% of total global residential value. The US is second with 11 percent. Ten countries – China, the US, Japan, Germany, the UK, France, South Korea, Canada, Italy, and Australia – make up 75% of the global residential total value.

While Covid-19 has slowed the economy, Viet Nam is one of Southeast Asia’s fastest-growing residential markets. In Q2/2021, apartment prices in Ha Noi increased for the tenth consecutive quarter, with primary prices in Cau Giay increasing 14% pa since 2017. In HCMC with limited supply in the primary market then landed property also performed well.  Q2 secondary YoY price growth has been between 15 and 20% for D7, D9 and Nha Be.

Commercial real estate

In 2020, global economic output decreased by more than 3%, and the total value of global commercial property fell by 5%, to US$32.6 trillion. Despite global economic decreases, Viet Nam fared well as GDP grew nearly 3% over the same period.

The largest global commercial property market is the US, with 27% of market value. China is next with 16%, and Japan is third with 6 percent.

Global forecasts indicate that commercial property will reach new heights by the end of this year. The market drops of 2020 will be reversed as market value growth of 5% is anticipated - pushing total commercial value to US$34.3 trillion by the end of 2021.

Both Hanoi and HCMC have strong office occupancy of 90% and relatively stable A Grade rentals, $33/sqm and $60/sqm gross respectively.  With these benchmarks they are two of Asia’s best performing office markets.

Viet Nam’s outlook

Residential and commercial property markets have seen strong growth in previous years and are still considered attractive investments by both local and foreign investors. Viet Nam has political stability, strong economic forecasts, increasing FDI, FTAs and a population with increasing purchasing power that all contribute to the potential of its real estate market. 

Whilst the chart below shows global negative growth for GDP, Commercial RE and Agricultural land, the contrast is that Vietnam has achieved growth for these three benchmarks. 

Mr. Matthew Powell, Director of Savills Hanoi commented: “There is strong potential for different types of residential developments with higher quality in Vietnam to meet the demand of buyers. With the improvement of infrastructure, it becomes more possible to live further away from CBD, leading to the decentralisation for those big cities such as Hanoi. However, the potential of the Vietnam real estate market does not only come from the residential sector, other sectors have huge potential like commercial, industrial, and retail properties. We are seeing a lot of investment capital into those types of developments. In Hanoi, there still a quite low amount of commercial supply in comparison to other regional pairs. Also, there is an increasing demand for industrial properties with new types of industrial products such as data centers, cold storage or logistics. There is a lot of growth areas of Vietnam real estate market, not only the residential sector alone”.