Decoding the 'great migration' of real estate businesses 9
Mr. Tran Khanh Quang, General Director of Viet An Hoa Real Estate Company, said that the `great migration` of Saigon real estate businesses is a complicated wave.
According to Mr. Quang, the expedition of real estate giants in Ho Chi Minh City should be viewed in the overall picture, with direct, profound causes and many intermediate factors that strongly impact this strategy.
Direct cause
Land funds in Ho Chi Minh City are increasingly difficult to create and increasingly scarce.
Skyrocketing land prices in Saigon are also the direct cause of the `great migration` of real estate businesses to satellite areas.
However, the third direct cause is the key factor pushing real estate businesses to move to the suburbs at breakneck speed.
In the psychology of most Vietnamese people, from the popular and middle class, to the rich and super rich, depending on the size of their pockets, corresponding dreams of hoarding real estate will appear.
Ordinary people want a small plot of land of 50-70 m2 to build a house, the middle class prefers a larger plot of land of 100-125 m2, but for the rich and super-rich, the demand is no longer limited.
This craze for land-locked real estate among many Vietnamese people has exceeded the supply scale of Ho Chi Minh City, forcing businesses to expand to satellite areas to develop projects to meet market demand.
Perspective of a huge 1,000-hectare project of a Ho Chi Minh City enterprise in Ho Tram.
The underlying cause
According to Mr. Tran Khanh Quang, the root cause of the expedition that started in 2018 is that the project legalization in Ho Chi Minh City is happening too slowly.
Profit is a vital requirement, real estate companies must have products to sell to survive.
The initial urge came from survival instinct, forcing real estate companies to move to the suburban market to improve revenue and profits.
From a few small spots at the end of 2017 and early 2018, to June 2020, the expedition wave has created a `great migration` with a record scale of real estate businesses in Ho Chi Minh City.
Mr. Quang analyzed that the profit margin of projects in satellite areas and neighboring provinces is much higher than that of Ho Chi Minh City.
In addition, the large land fund in satellite areas also helps businesses facilitate mass production on the basis of extremely large-scale land funds, creating many beautiful products, meeting the diverse needs of the majority.
Intermediate factors
Ho Chi Minh City’s inter-regional infrastructure is undergoing transformation with many highway, beltway, airport projects… continuously being announced recently.
Meanwhile, the mass cash flow (popularly 1.5-2 billion VND) is stuck in finding land-based investment channels in Ho Chi Minh City when project townhouse prices have increased to 9-10 billion VND in early 2020.
On the other hand, the emergence of Covid-19 in the early months of this year has changed the investment mindset of the real estate market.
Potential goes hand in hand with risk
CEO Viet An Hoa affirmed that satellite areas and bordering provinces will open new doors for the development of the Ho Chi Minh City region in a macro perspective, but this potential lies in the future.
Therefore, this `great migration` requires a methodical investment roadmap, standard planning from the beginning, transport and social infrastructure (roads, schools, stations…) deployed first, housing
However, the current concern is that real estate prices in suburban areas have also been pushed up too high compared to the local average.
On the other hand, regional transport infrastructure that is not implemented quickly or often takes much longer than expected can also become a barrier in the way of this `great migration`.
If investors are incompetent, lack vision or only pursue profits, and do not fulfill their commitments to schools, hospitals, commerce, entertainment, and landscapes, they will lose the value of the product upon handover.
