Real estate development and the overall economy in Ho Chi Minh City go hand in hand, one could even say that real estate is one of the driving motors. Around 250 professions are connected to various facets of land trade, development and construction. From the actual investors over construction workers to the artists who paint the pictures that embellish walls in newly constructed houses.
As long as urbanisation and migration from rural to urban areas continues, there is demand for commercial, industrial and living space in Ho Chi Minh City. Together with factors like the rising middle class that will be covered in another article, as well as foreign investment, a stable economy and development plans from the government, this trend continues to contribute to a highly profitable real estate market.
Not only the rapid urbanisation is a factor of the positive development in Ho Chi Minh City, also the current, as well as predicted population expansion across Asia Pacific, especially in emerging countries like Vietnam. The United Nations forecast a population increase of 190 million by 2020 and 160 more million by 2025 from which the highest growth will be centred on India, China and ASEAN countries. If we take a look at the UN data, we see a population increase of 1.1% per annum, combined with an urbanisation rate of 3% from 2010-2015. All these people moving to the three major cities Da Nang, Hanoi and of course Ho Chi Minh City need a place to live and a place to work.
Let us take a look at the development in the last 20 years or so, since the government allowed people to own land in the mid-nineties. After the initial boom that followed the opening of the market, largely driven by investment from Vietnamese living overseas, the field got calmer in the early nineties until 2005. Mainly because there was no proper investment and trust in the market was not given at that time. One major reason for the decline in real estate investment was the inflation among 10 Asian countries that kept potential foreign investment partners looking out for more stable markets.
However, from 2005 to 2008 the market, as well as the overall economy, experienced a significant rise. It was a highly optimistic time and clever business people could make a fortune. Too optimistic perhaps, since by the end of this surge, many less careful investors took on big loans to increase their profit. With the recession following the financial crisis of 2008, the real estate trade experienced major losses and investors ended up in, let’s say uncomfortable situations. Land you bought for one billion suddenly was worth just 500 million VND, but there was still the debt to pay.
This situation continued until the beginning of 2013 when the economy began to recover visibly and the real estate market once again started to rise significantly. However, compared to the boom of ‘05-’08, this time the rise is more stable because investors focus on land development rather than pure speculation. Also the government policies are in favour of a stable development that makes sense on the long run.
Another factor is the strong influx of foreign investment, mainly from developed Asian countries. We see money flowing into Saigon from Japan, South Korea. Hong Kong, Macau, Taiwan and Singapore, where the development relaxed a bit and turned into a slow but stable rise.
Currently the real estate market is in a state of growth. In 2016, foreign groups invested 1.3 billion USD into acquiring property in Vietnam. Even if this FDI figure started high and dropped by 44 percent throughout the year, real estate was still the second biggest market sector in terms of foreign investment. The strongest partners were companies from Japan, South Korea and Singapore. According to the Ho Chi Minh City real estate business association, the trend will continue in 2017.
Of course, predictions are always risky, we had that problem in the past when due to overgrown optimism bubbles began to form and popped at the spark of a world economical tremble. However we are optimistic about the future, since pessimism accomplishes nothing.
Another factor we should pay attention to is the massive land development across the river. This development is not following a mindless expansion, it is carefully encouraged by the government. The plan is to sort of mirror the Districts 1 and 3 on the other side, Thu Thiem becoming a second city centre, while District 9 will be a main residential and business area.
If you ride from District 1 to Thao Dien - it does not matter which way you take - you see many great projects being under construction. The route over Saigon Bridge features the first track of Saigon’s metro, that will connect Ben Thanh Market with Suoi Tien Park and all the areas in between. If you take a look at the prediction of the Saigon Metro System as published by Saigoneer some time ago, you see M2 connecting to Thu Thiem and Cat Lai. While the rest of the map is rather fictional for the lack of information from official places, you should pay attention to these two areas.
If you take the tunnel under Sai Gon River, you end up in Thu Thiem and the development there cannot be ignored. Remember when you stopped by the riverside to take a photo of the skyline in District 1? Soon the view will be obstructed by new high rises. Even if most people will miss the greenery, it is about time to expand the centre and make it ready for the new wave of traffic that will pop up in the not so far future. This traffic will mainly involve cars instead of motorbikes and, hopefully, public transport.
Another factor that speaks for Thu Thiem as target of massive development is its strategical location. It is the entrance portal to the city itself from the north, the east – and from everywhere in the world thanks to the new airport. Long Thanh International Airport will finally lift the weight of international arrivals and departures off the shoulders of our too small and too crowded Tan Son Nhat Airport. The location of the new airport will be just 20 minutes from Thu Thiem.
Thu Thiem Tunnel is already a connection point to the inner city and Mai Chi Tho street links the same to outbound highways like CT01 and QL52, which cover most of the transport from Dong Nai.
The third factor that speaks for the development of Thu Thiem is its location next to Saigon River. While District 1 is too crowded to make space for a centrally located harbour, the new location can do exactly that – mirror the industrial harbour in District 7s Tan Thuan Dong and accept smaller cargo vessels as well as passenger ships.
For the big, hulking cargo vessels that haul Ho Chi Minh City’s goods away to international destinations as well as loads of cheese for the increasing crowd of expatriate workers, we have Cat Lai Port on the banks of the deeper and therefore more navigable Dong Nai River. To properly connect this major port to the city centre will boost the Saigon’s economic efficiency in a most pleasant way.
There are already residential investments in the area, just take a look at Melosa Garden that provides homes that are mainly targeted to foreign expatriates and the upper middle class of Vietnamese who seek to be close enough to their office locations but are searching for an opportunity to escape the noise and pollution of the inner city. Another example are the Valoria Fuji apartments, in District 9 as well.
With the growing economy of Vietnam, the ongoing urbanisation, population increase, beneficial government edicts and the rise of the middle class in search for homes and business locations, the real estate market is destined to grow and simultaneously provide jobs for many people from a plethora of different professions. Talking about the role of real estate development in Saigonese economy is like talking about hydrogen atoms in water.
This article has actually been written for a local magazine, but since they decided to break our agreement by removing all authorship credits that were agreed upon from past and current articles, crediting the work to themselves, I therefore reclaim my intellectual property.
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