Real estate represents an important part of people’s wealth, and this is especially true for many homeowners in Asia. According to the most recent research from Savills Vietnam, 30% - 40% of household income is for housing expenses such as rent, mortgage and buying property. With about 50,000 units sold out in 2016 in HCMC and Hanoi, the size and scale of this real estate market is becoming attractive and lucrative sector for many investors. 

Demographics

Demographics includes many components of a population such as income, gender, working age, urbanization rate ad population growth. These figures can show how real estate is priced and what property segmentation are in demand. Major change in the demographics also can impact strongly on real estate trend for some decades.

For example, from 1995 to 2014 the urbanization rate in Mainland China went up from 29.04% to 54,77%. In the same period, the real estate market boosted significantly and became one of key driver for the national economy. This example can refer to the similar situation of Vietnam where the urbanization rate also grew from 20 percent in 1998 to 36.6% in 2016. An increase of urbanization rate is one of the interesting fact in the last 8 years which is expected to create more demands for HCMC and Hanoi market.

In addition, the so-called "middle and affluent class" earning $714 a month or more in Vietnam will double to 33 million people, about a third of the population, between 2014 and 2020, the Nikkei Asian Review reported, citing Boston Consulting Group. These trends are expected to lift demand for real estate, increase rental yields and the potential for capital appreciation for investors who are looking at investing in Vietnam.

These factors can help investors narrow down the segmentation and location of potentially desirable real estate investments before the trend has started. 

Click here to view a graph showing the rise in the Vietnamese middle class

The Economy

Another key factor that affects the value of real estate is the overall health of the economy. This is generally measured by economics indicators such as the GDP, FDI, manufacturing activity, the prices of goods, etc. Broadly speaking, when the economy is good, so is real estate.

Click here to view a table of Vietnamese Macro indicators: Source: Savills Vietnam, H1.2017

Infrastructure

Infrastructure planning plays a pivotal role in establishing a significant impact on real estate development taking shape across the city. With greater and better accessibility, connectivity, and infrastructural development, real estate developers have the opportunity to transform a once under-developed area into habitable zone to match the new development to the urban setting of a metro. It boosts a significant influence on our personal and monetary well being. In order to find a good location to invest, investors should catch infrastructure trend instead of completed ones.

Vietnam's public and private sector infrastructure investment averaged 5.7 percent of gross domestic product in recent years, the highest in Southeast Asia and compares with 6.8 percent in China, according to the Asian Development Bank. Indonesia and the Philippines spend less than 3 percent, while Malaysia and Thailand spend even less at under 2 percent.

In general, Vietnam economy and demographic make it an attractive and lucrative market for many investors. Investors should understand the key drivers of market before choosing where and which development can bring high return on investment as they expect.

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