A new wave of supply hitting provincial markets
Since the beginning of 2019, the strict audit related to housing procedures has been one of the greatest challenges for both developers and home buyers, leading to a decline in housing supply and transaction volume in major cities like Hanoi, Ho Chi Minh City, Da Nang, and Nha Trang. As it has been a challenging task to get approval from the local authority, the number of new project launched in these city falls sharply.
Mr Nguyen Van Dinh, General Secretary of Vietnam Real Estate Brokerage Association, said that the challenge forced developers to leave the "dreamland" and seek new markets in provinces. The places once marked as “lack of potential” are now the new destinations for high-profile real estate brands to develop projects.
In recent years, many cities other than Hanoi or Ho Chi Minh had grown at a rapid speed in term of economy, tourism, and industry. Thus, it is understandable for real estate developers to choose these cities as the new destinations while making a market shift and seeking investment opportunities. Still, only until the authorities of major cities tighten the housing policies that developers took actions and rushed to the new market. Notably, the new wave of real estate supply also hit the provinces with negligible economic development or unexploited tourism.
The pioneer in this trend and also a top real estate developer – FLC has been pouring money to exploit the untouched land on the real estate map. In just a few months, numerous new project has been launched by FLC, like the tourist resort complex - FLC Quang Ngai, which located in Quang Ngai. The project locates in Quang Ngai with the scale of up to 1,026 hectares and the total initial capital of 11 trillion VND. Others big projects of FLC recently are the LC La Vista Sa Dec urban area in Dong Thap (15 hectares) and FLC Legacy Kon Tum (18 hectares). Both of these projects consist of diverse types of property like shophouse, boutique, condominium complex, and a 5-star hotel.
Another developer – APEC has also launched its new projects in provinces just within a year such as Apec Royal Park Hue, Apec Mandala Wyndham Phu Yen, Apec Royal Park Bac Ninh, Apec Mandala Wyndham Mui Ne, Aqua Park Bac Giang, Apec Diamond Park Lang Son, Apec Golden Palace Lang Son, Apec Mandala Wyndham Thai Nguyen, etc. APEC main housing products for the provincial market are shophouse, condotel, and high-end condominium.
Kosy Group also targeted the small market with projects such as Kosy Lap Cai and Kosy Bac Giang, which mostly consist of shophouses, detached houses, and villas and divided by functional areas (residential area, commercial area, service area, educational area, sports area, entertainment area, etc).
A new investment choice
Before the new trend, local developers of provincial marker only invested in project land and residential land segment. The new wave of developers hit the market has opened up new segments for these small-sized market, therefore, contributing to diversifying the local housing products with high-condominium, shophouse, condotel, etc.
With the advantage of large land resources, provincial projects are larger in scale compared to projects in major cities and synchronous utilities and services, which create a higher living standard for their residents. As a result, provincial projects has been the new target for real estate investors in term of finding a new investment channel. According to data provided by Batdongsan.com.vn, attending real estate events, the number of investors from major cities like Hanoi, Quang Ninh, Hai Phong, Bac Ninh, and Ho Chi Minh has surpassed the number of local investors.
Nguyen Kien Hai, an investor from Hanoi, said big cities like Hanoi, Ho Chi Minh, or Da Nang have been lack of supply for over a year. The small number of new projects launched in these cities didn’t show great profitability while the provincial market has grown rapidly. Mr Hai along with the majority of investors, therefore, decided to take the risk and invest in the new markets. According to Mr Hai, as a new and unexploited market, low supply and price are undeniable advantages of the provincial market. “Investors can earn higher returns than big markets if they choose to invest here.”
Not as positive as Mr Hai, Ms Phan Huyen My – an Hai Phong-based investor pointed out the “temporary” advantages of the provincial market caused by the scarcity of supply and market saturation situation in big cities. Another problem is the over-priced housing products, which was explained by the developer as a result of synchronized utilities and services, unbalanced with the affordability of home buyers.
“I want to underline the quality of supply here. Every project has to base on the practical need for accommodation. The gap between overvalued housing product and actual affordability of buyers will make the home difficult to sell, leading to high housing vacancy rate. It turns out that developers are playing the game by themselves while investors are struggling to push sales up.”
