VietNamNet Bridge- A young population and fast urbanization are the major elements turning Vietnam into a promised land for local and international property development companies.

Le Thanh Cong, director of D&C Construction Consultant Co, former vice chairman of the HCM City Construction Association, says that the construction industry has grown along with the housing demand. “Without exception, the housing demand in the country is huge and the construction industry has great potential for development,” Cong told the Weekly.

In general, the real estate market covers different segments, but the segments of housing development, hotel, office and retail property construction are most promising for the construction industry. As a result, the market for building materials such as steel, cement, sand, paint and décor materials will benefit greatly from this trend.

Huge housing demand

In a master plan for urban development toward 2020 and vision to 2050 approved by the Prime Minister, the Government set a target to develop an urban system that can accommodate some 35 million inhabitants by 2015, some 44 million by 2020 and some 52 million by 2025. Going along with the plan, a huge infrastructure system and new urban areas will be developed. The plan also set a housing standard of 15 square meters per capita by 2015 and then 20 square meters by 2025.

According to preliminary statistics by the Ministry of Construction, there are some 2,500 urban projects around the country, in which Hanoi has some 800 projects, HCM City around 1,400 projects, Haiphong 260 and Danang 120. Most of the projects feature housing development, office and commercial buildings, among others.

RNCOS, a global market research and information analysis company, has conducted a survey of Vietnam’s property market. In its “Vietnam Housing Forecast to 2013,” the company projected that the residential housing spending in the country will rise significantly in the coming years, given the rapid migration from rural to urban areas, an increasing number of households and improving living standards.

According to the research company, the country’s huge housing shortage is offering ample scope for development. At present, many people do not have their own permanent houses and more than 70% of the total households live in either semi-permanent or temporary wooden houses without proper housing facilities. In addition, the number of households is also rising, which will inflate the demand for housing units. In the survey, RNCOS estimated that the country is deficient of nearly 20 million permanent housing units at present.

Some local market analysts shared the above ideas, saying that fast urban development and growing population, especially in big cities such as HCM City and Hanoi, offer abundant opportunities for the property market as well as the construction industry. They estimated that city dwellers will reach some 10 million in Hanoi and some 12 million in HCM City by 2030. Given the housing standard of 15 square meters per capita, the two cities would need an additional housing space of 160 million square meters to quench the thirst of housing.

At present, the two cities are expanding their areas. Hanoi is extending westward while HCM City plans to develop into a multi-center city with new urban areas such as Thu Thiem, Saigon South and northwest Cu Chi. In addition, the road system development is opening opportunities for properties in the fringe districts to grow in the years to come.

Commercial property growth

Besides the housing segment, office building, commercial center and hotel development are supporting the construction industry, and the building materials will benefit from this trend.

In its quarterly market report, the property consultant Colliers International says that the economic slowdown has not much affected the interest in hotel development. In HCM City alone, there are over 12 hotel projects across the three- to five-star grades expected to be completed over the next five years, providing over 3,500 additional rooms. Across the country, there are hotel and resort developments underway. For example, Petroland is building a four-star hotel in Tay Ninh Province; Eurowindow has announced the development of a five-star hotel and spa in Cam Ranh City; and Anh Dao Tourist has announced plans for the Oceanami Resort comprising a five-star hotel and 180 villas in Ba Ria-Vung Tau Province.

In terms of foreign investment, Vietnam is considered a market full of potential for hotel and resort development due to its lengthy coastline. Recently, ITC Spectrum has signed a hotel management agreement with Marriott International, Ritz Carlton and Outrigger Enterprises for three resort projects in the central city of Quy Nhon. Accor has announced plans to have 30 operational hotels in Vietnam by 2013. With this strong level of development and with more projects across Vietnam expected to commence, the future does look positive for this property segment and the construction industry as well.

Another potential segment is office building. Besides its current space of 1.4 million square meters, the segment is witnessing the increasing number of projects with a further two million square meters under construction or planning, which are expected to come online over the next five years.

Commenting on the construction market, Bui Tien Thang, deputy general director of Saigon Thuong tin Real Estate JSC, better known as Sacomreal, has the same view over the market. He says that the huge demand is a magnet to attract many construction companies, leading to fierce competition in the market.

The international delivery company UPS has recently conducted an annual survey of the business sentiment of small and medium enterprises (SMEs) across the Asia Pacific, showing that local SMEs have a prevailing belief in the positive growth in the region. As Vietnam accelerates economic growth and continues to invest in infrastructure, the construction-realty industry will continue to boom and will be the country’s key growth driver this year. Seen as the key economic pillar, construction is a top choice for Vietnamese SMEs over the next three to five years.

Source: SGT