Even these journey times would not be acceptable in a developed city, which is why Vietnam has substantial road and rail infrastructure work underway to expand that 60-minute travel zone to at least 50km and perhaps 80km. This will create a Greater Ho Chi Minh City metropolis, with eight linked satellite cities.

Similarly, we will see the emergence of the Hanoi Capital Region. In the past five years the city has been expanding steadily with the development of new urban areas such as Long Bien Urban Area east of the Old Quarter and Ha Dong to the south. The Hanoi 2030 Vision will create an urban cluster of one central city and five satellite cities, home to 9m people.

This infrastructure work is a huge positive for real estate. Better connectivity will lead to rapid urbanisation and increased population density, driving wealth and thus demand for property.

The best way to see what lies ahead is to look at our neighbour China. Vietnam and China have similar styles of government, substantial foreign direct investment and emergent middle classes. In 2020 Vietnam’s GDP per capita was about $3,500 – similar to China’s in 2008.

From 2003 to 2018, China’s real estate market grew at almost 10% pa in both prices and volume, without suffering a major downturn. Crucial to this performance was investment in infrastructure. From 2003 to 2018, the compound annual growth rate (CAGR) of China’s public investment was almost 20%. That meant urbanisation grew from 40% in 2003 to almost 60% in 2018.

The Vietnam government’s focus on infrastructure investment in the next 10 years suggests urbanisation and GDP per capita in Vietnam should grow at a similar rate to China’s growth in the 2000s. If so, by 2030 the urbanisation of Vietnam should reach almost 60% and GDP per capita $9,000.

The Chinese public investment cycle had a huge effect on its property market. We believe the same thing will happen in Vietnam, especially with the emergence of metropolises in Ho Chi Minh City and Hanoi. We predict property transaction volumes and prices should rise at a healthy 11% CAGR and 7% respectively.

Around Ho Chi Minh City, the big property players have scooped up land banks in the suburbs in anticipation of this infrastructure boom. Meanwhile, there is a digital transformation taking place and we expect transactions to take place securely online soon.

Infrastructure spending will spur development of Vietnam’s cities into metropolises, growing the real estate market, while technological innovation will make it more efficient.

Vietnam is on the starting point of the same growth path as China.

Minh Trinh is property analyst at Dragon Capital

Further reading:
Savills Vietnam Research

Contact Us:
Simon Smith