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Everything you need to know is included in our Vietnam Property Pack
Are you considering buying real estate in the land of Dragon Descendants? Are you wondering if the prices are adequately positioned?
Market timing is a topic where everyone has their own ideas. The Vietnamese real estate agent you consulted might advise you that now is the opportune time to buy property, while your childhood friend from Hanoi may suggest exercising more patience before making a decision.
At BambooRoutes, when we create articles or update our pack of documents related to the real estate market in Vietnam, we prioritize facts and data over opinions and rumors.
We've done extensive research on official reports and government website statistics, resulting in a comprehensive database. Here's what we've learned, which can provide valuable insights for your decision-making process regarding real estate purchase in Vietnam.
Enjoy the article!
How is the property market in Vietnam currently?
Vietnam is, today, a reliable and stable choice for investors
Neutral
If you want to invest in real estate, prioritize stability as it ensures future planning and financial security. It is an information you need as a foreigner looking to buy a property in Vietnam.
Rest assured, Vietnam remains a stable country. The last Fragile State Index reported for this country is 60.9, which is a good performance.
Vietnam has a strong economic growth rate and a stable political environment, which makes it an attractive option for investors looking for a safe and profitable investment. Additionally, the government is actively encouraging foreign investment through its economic and legal reforms, making it a reliable and stable choice for investors.
Stability is here. Now, let's dive into the economic forecast.
Vietnam is forecasted to grow massively
Positive
Before buying real estate, evaluate the economic performance of the country.
As per the IMF's forecasts, Vietnam is likely to finish 2023 with a growth rate of 5.8%, which confirms the country's quick development. As for 2024, we're talking 6.9%.
That's not all - this impressive growth will keep going on since Vietnam's economy is expected to increase by 29.7% during the next 5 years, resulting in an average GDP growth rate of 5.9%.
The expected massive growth in Vietnam is a very good thing for real estate investors because it indicates a strong and rising demand for property, which can lead to higher property values and rental yields. Additionally, the influx of businesses and people from abroad is likely to further boost the real estate sector.
Nonetheless, GDP growth is not the only metric to look at.
Vietnamese business owners still don't express confidence in current market conditions
Negative
Although the GDP forecast provides insights, it may not fully capture the local sentiment in Vietnam as it relies on external projections. Luckily, in Vietnam there is an official metric that is frequently updated. This doesn't apply to every country, so we're in luck.
The Business Consumer Index (BCI) is a metric that determines business leaders' confidence in the current and future economic conditions, based on surveys and assessments.
The latest figure for the Business Confidence Index, reported by The Global Economy, is 0 for Vietnam. For interpretation, it's quite low.
Unfortunately, we're on a descending trend. The score, 12 months ago, was at 8.
The current state of business confidence in Vietnam, like in several other countries, is relatively low, yes. However, it's important not to overlook the potential opportunities available in the Vietnamese property market. While a low confidence score may signify a temporary phase of uncertainty or caution, it is a natural part of economic cycles.
Now, let's examine additional data to determine whether this is a favorable moment to consider investing in Vietnam.
Vietnam's population is growing and getting a lot richer
Positive
When it comes to buying real estate, population growth and GDP per capita play a significant role, because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In Vietnam, the average GDP per capita has changed by 18.3% over the last 5 years. It ranks the country in the top 10 for the growth of this indicator. Furthermore, the Vietnamese population is growing (+3% in 5 years).
This means that, if you purchase a colonial-style house in Hoi An and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.
If you're considering purchasing and renting it out, this trend is a good thing. Then, there might be a rise in rental demand in Vietnamese cities like Ho Chi Minh City, Hanoi, or Da Nang in 2024.
Rental yields are average in Vietnam
Neutral
Shifting gears, let's assess the rental yield.
It represents the annual rental income generated by a property divided by its purchase price or market value. For instance, if a property in Vietnam is purchased for 10,000,000,000 VND and generates 400,000,000 VND in annual rental income, the rental yield would be 4%.
According to Numbeo, rental properties in Vietnam offer gross rental yields ranging from 1.7% and 4.4%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Vietnam.
It means that your income potential is relatively moderate.
Everything you need to know is included in our Vietnam Property Pack
In Vietnam, inflation will intensify
Positive
Simply put, inflation is the decrease in the value of money.
It's when your customary bowl of phở costs 40,000 Vietnamese đồng instead of 35,000 Vietnamese đồng a couple of years ago.
If you're about to invest in a property, high inflation can benefit you:
- property values tend to increase over time, leading to potential capital appreciation
- inflation can result in higher rental rates, increasing cash flow from the property
- inflation reduces the real value of debt, making mortgage payments more affordable
- real estate can act as a hedge against inflation, preserving the value of the investment
- diversifying into real estate provides stability during inflationary periods
- tax advantages, like depreciation deductions, can help offset the impact of inflation
In accordance with IMF projections, over the next 5 years, Vietnam will have an inflation rate of 19.0%, which gives us an average yearly increase of 3.8%.
This data shows that Vietnam could experience inflation, resulting in rising prices. Therefore, it's worth considering buying property now as a potential opportunity.
Is it a good time to buy real estate in Vietnam then?
Let's wrap things up!
The year 2024 presents a compelling opportunity for property investment in Vietnam due to a confluence of favorable indicators. The country's substantial growth forecast underscores its potential as an attractive market for property buyers. With a growing population and an incremental increase in wealth, the demand for housing and real estate is likely to surge, driving up property values and creating opportunities for capital appreciation.
In addition to Vietnam's growth prospects, the projected intensification of inflation can offer benefits for property investors. Real estate often acts as a hedge against inflation, as property values and rental income tend to rise alongside increasing prices. This feature can help safeguard the value of investments against the eroding effects of inflation over time.
While Vietnam's reliability and stability make it an appealing choice for investors, the neutral signal of average rental yields should also be considered. Although not exceptionally high, these yields could still provide a steady income stream for investors, further enhancing the attractiveness of property ownership.
Despite the lingering lack of confidence among Vietnamese business owners in current market conditions, the overarching positive signals of growth, increasing population and wealth, inflationary trends, stability, and rental yields present a compelling case for property investment in Vietnam. Careful consideration of these factors will enable investors to make informed decisions aligned with their financial objectives.
We hope this article has been helpful!. If you need to know more, you can check our our pack of documents related to the real estate market in Vietnam.
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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
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