The Big Role of Real Estate in HCMC’s Economy
Real estate development and Ho Chi Minh City’s economy go hand in hand. You could even say that real estate is one of the economy’s driving forces. Around 250 professions are related to the various aspects of land trading, development and construction, from the actual investors and construction workers to the artists who paint the pictures that embellish the walls in newly constructed houses.
As long as the population growth and migration from rural areas continue, there will be demand for commercial, industrial and living space in Ho Chi Minh City. Together with factors like the rising middle class, the increase of foreign investment, the stable economy and governmental development plans, this trend will keep feeding a highly profitable real estate market.
Apart from rapid urbanisation in the Asia-Pacific region, the United Nations forecasts a population increase of 190 million in the Asia-Pacific by 2020 and another 160 million by 2025, with the highest growth rates in India, China and ASEAN countries.
If we take a look at the 2015 UN data for Vietnam, we see a population increase of 1.1 percent per annum, combined with an urbanisation rate of 3 percent from 2010 to 2015. All these people moving to the three major cities of Hanoi, Danang and, of course, Ho Chi Minh City, need a place to live and a place to work.
Let’s take a look at the development of real estate in the last 20 years since the government began allowing people to own land in the mid-’90s.
After an initial boom, largely driven by investment from Vietnamese living overseas, the field calmed down. A lack of trust in the market coupled with regional inflation had potential foreign investors looking 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 businesspeople made a fortune. Unfortunately, by the end of this surge many less careful investors who had taken on big loans were faced with the financial crisis of 2008. Land they had bought for VND one billion was suddenly worth just half that, and there was still the debt to pay.
This situation continued until the beginning of 2013 when the economy clearly began to recover and the real estate market once again began rising significantly. However, compared to the boom of ’05-’08, the rise this time was more stable because investors focused on land development rather than pure speculation. Government policies also favoured stable development that made sense in the long run.
Another factor was the strong influx of foreign investment, mainly from developed Asian countries. Money flowed into Saigon from Japan, South Korea, Hong Kong, Macau, Taiwan and Singapore, where development had relaxed a bit and turned into a slow but stable rise.
Present and Future Development
Currently the real estate market is growing. In 2016, foreign groups invested US$1.3 billion into property in Vietnam. This foreign direct investment (FDI) figure started high and dropped by 44 percent over the year, but 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, but the future does look rosy. For instance, the massive land development across the river from District 1 does not follow a mindless expansion, but is carefully encouraged by the government.
The plan is to try and mirror the Districts 1 and 3 on the other side, with Thu Thiem becoming a second city centre, while District 9 will become a main residential and business area.
Green Grass Across the River
If you take the tunnel under the Saigon River, you end up in Thu Thiem where the development cannot be ignored. Remember when you stopped by the riverside to take a photo of the sunrise from District 1? Soon the view will be obstructed by new high-rises.
Even if most people will miss the greenery, the city centre will expand to make it ready for the new wave of traffic that will pop up in the not-too-distant future. This new wave will mainly involve cars and, hopefully, public transport.
Another factor that speaks for Thu Thiem as a target for massive development is its strategic location. It is the 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 our overloaded Tan Son Nhat Airport. The location of the new airport will be just 20 minutes from Thu Thiem.
The 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 the Saigon River. While District 1 is too crowded to make space for a centrally located harbour, the new location can do exactly that. It can mirror the industrial harbour in District 7’s 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 and bring in 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. Properly connecting this major port to the city centre will boost Saigon’s economic efficiency.
The Homes of Tomorrow
There are already residential investments in the area – just take a look at the Melosa Garden development in District 9, which provides homes targeted at expatriates and the upper middle class of Vietnamese who want to be close enough to their office locations in the inner city without the noise and pollution. Another example are the Valoria Fuji apartments at the other end of District 9.
With the growing economy of Vietnam, the ongoing urbanisation, the steady population increase, the government policies promoting development and the rise of the middle class in search of homes and business locations, the real estate market is destined to grow and provide jobs for people from many different professions. One thing is certain: the expansion of real estate is an integral part of Saigon’s economy.