Vietnam's real estate facing difficulties due to COVID-19

The commercial, resort, housing, and industrial real estate markets in Vietnam are all greatly affected by the complicated development of the epidemic.

In a recent report, CBRE stated that the Covid-19 pandemic is having a negative impact on the Asia-Pacific economy. According to experts, nearly all major types of real estate are suffering significant losses over the past 2 months. As a result, CBRE has revised its Asia Pacific GDP growth forecast to 4% in 2020, a decrease of 0.2%.

Landlords discount rental costs

The retail market is one of the industries most affected by the epidemic, especially the food, beverage and entertainment industries. In Vietnam, some retailers are asking landlords to support by cutting up to 50% of the rent or not collecting rent during the outbreak. Many large cities in the region have a retail industry that depends on the development of tourism. Therefore, the decline in tourists will become a burden for this market.

In the event that Covid-19 spread more strongly than initially expected, that local people avoid going to public and crowded places could disrupt the domestic consumer market. This situation will further increase the pressure on traditional retailers that had been affected by the rapid development of e-commerce.

Resort real estate suffered heavy losses

The losses are caused by the shortage of Chinese and Korean visitors, which accounted for 56% of foreign visitors to Vietnam in 2019. In Nha Trang market, the Khanh Hoa Department of Tourism recorded a decline of 75% in international tourists and 82% in domestic tourists in February 2020 compared to the same period last year.

Besides, activities of businesses and events, meetings, conferences have all been cancelled due to fear of Covid-19, and large organizations and companies have also cut down the number not so important business trips.

Although the first 2 months of the year are often considered the peak season of the hotel market, this year some high-end hotels in Ho Chi Minh City have recorded a decline to 30-40% in occupancy rates over the past two months.

Real estate promotions and sales events delayed

In the housing segment, investors as well as real estate exchange floors at this time have been forced to postpone the advertising and promotion activities due to the regulation of avoiding large crowds during the outbreak.

These programs are expected to be held in the last quarters of the year. Normally, the first quarter of the year is not a very exciting period for investors due to the influence of the Lunar New Year. Therefore, the market is expected to have a large volume launched in the second half of 2020. Moreover, investors in this market are also more cautious in making investment decisions, making the market gloomier.

Demand for industrial real estate decreased

For the industrial real estate market, CBRE's report shows that the outbreak of COVID-19 has seriously affected Vietnam due to the decline in demand from Chinese tenants. At the regional level, 40% of intermediaries in Asia's supply chain are now produced in China, so disruptions in the supply chain will cause chain effects on neighboring countries.

Supply chain disruptions are taking place as raw materials for production from China account for 35% of Vietnam's total import value of production materials. Economists forecast that Vietnam, Malaysia and Cambodia will be the most affected markets when more than 6% of the investment rate to the gross value added (GVA) of these economies depends on China.

Source: CBRE


Writer: Alice Hoang Thao – VietnamCredit-

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