Satellite cities becoming new frontier for real estate

Satellite cities becoming new frontier for real estate

Limited land and slow approval procedures are causing a fall in real estate supply in the country’s major cities, with developers instead flocking to satellite cities both north and south.

Satellite cities becoming new frontier for real estate

On January 10, more than 1,000 buyers participated in the launch ceremony of Bien Hoa Universe Complex, located in Bien Hoa city of Dong Nai province. And just a few weeks previously, more than 600 villas and detached houses in the first phase of the Waterpoint project from Nam Long Corporation in Long An province were handed over to customers.

Minh Hoang, an investor in Hanoi, told VIR that profit potential in cities like Hanoi and Ho Chi Minh City is not as high as before, and so other provinces like Dong Nai and Long An are getting in on the real estate action.

“Moving to satellite cities would be a good choice for many private investors. This field of investment is now at the beginning step and the room for growth remains very strong,” Hoang said.

Angus Liew, general director of Gamuda Land in Ho Chi Minh City, expressed that land funds inside the city has been limited, especial for areas large enough to set up townships. “We now have to work with some companies to try and find new land suitable for us to develop a township,” Liew said.

Improvements in the infrastructure system are also helping satellite and neighbouring towns increase their attraction for major property developments.

“We are considering neighbouring and satellite provinces such as Binh Duong, Dong Nai, and Long An in the south; and Hung Yen, Haiphong, and Phu Tho in the north. All of those are offering very good opportunities for large-scale real estate projects,” Liew said.

Domestic developers meanwhile have already jumped into the game. Phu Dong Group is preparing to launch a range of projects. First is Phu Gia Residences located in the heart of Nhon Trach district in Dong Nai. This project will offer more than 260 products to the market in the first quarter of this year.

In Long An province, Thang Loi Group has just open for sale its Sol City in Can Giuoc district, located over a space of 130 hectares. Long An is also the location of many other projects such as Long Cang Riverpark, invested in by Phuc Land Real Estate Company, and West Lakes Golf & Villas, funded by Tran Anh Group.

Along with that, large-scale developers such as Novaland, Van Phuc Group, Dat Xanh Group, and Phat Dat Corporation have already been investing in satellite cities for some time.

Promising trends

In 2020, the real estate market in Ho Chi Minh City and Hanoi experienced a difficult period due to the impact of the COVID-19 pandemic, in addition with increasing land prices and slow approval processes for projects by local authorities.

Based on current conditions, experts said that the real estate market in neighbouring provinces of Ho Chi Minh City will rise, becoming a stronger investment attraction in the coming years.

According to economist Le Ba Chi Nhan, the improvement of infrastructure between Ho Chi Minh City and neighbouring provinces in recent years has greatly helped developers explore new options.

“Setting up real estate projects in satellite cities will create competitive products for a market which is in serious lack of supply and push up the growth of the whole area,” Nhan said.

From the perspective of buyers, living in modern urban areas of satellite cities is also becoming a trend – somewhere they can improve their living standards with much better environments and more agreeable population densities.

Dang Hung Vo, former Deputy Minister of Natural Resources and the Environment, acknowledged that the trend of investing in real estate projects in satellite cities and provinces is a given. “Once inner-city land funds become unavailable, it is inevitable that real estate developers move to the surrounding areas. As for end-users, when infrastructure develops and roads are convenient, living in neighbouring urban areas is a very good choice,” Vo said.

Potential hotspots

According to an expert from domestic property website batdongsan.com.vn, buyers and investors are paying much interest to the six northern cities and provinces of Quang Ninh, Haiphong, Bac Ninh, Hoa Binh, Hung Yen, and Vinh Phuc. In the south, seven provinces are most hunted in particular – Binh Duong, Dong Nai, Ba Ria-Vung Tau, Long An, Binh Phuoc, Can Tho, and Kien Giang.

Among those, Binh Duong is the hottest destination as its population shot up 200 per cent over the last decade, the highest percentage in Vietnam. Figures show that around 44 per cent of local residents in Binh Duong lease homes and do not own a private home.

However, not every market is a safe destination as more and more developers enter. Poorly-planned development could bring oversupply and those destinations could become “death projects” if they cannot attract residences to live in.

According to Nguyen Tran Nam, chairman of the Vietnam Real Estate Association, to make those projects become fruitful, developers must know how to attract residents to come and live in them.

“In order to do that, developers must create enough facilities and a good infrastructure system then residents would come. They must not make many promises to buyers which they later fail to meet,” Nam said.

Moreover, developers are advised to get to grips with the special advantages each province can offer.

“Coastal provinces always have more advantages thanks to natural incentives to develop tourism, while delta provinces with good a infrastructure system would be reserved for the second-home segment. Industrial development hubs meanwhile should be reserved for developing mid- and lower-end houses for workers,” Nam said.

He also warned that buyers should think twice about a new development model known as a “farmstay”, which has appeared in satellite provinces in recent years. “Land for farmstays is all agriculture land, which can be used only for farming. If buyers invest in this model, their capital investment would be kept for long time and they would face difficulties when investments cannot be recycled,” Nam added.

Nguyen Hoang - Research and Development director, DKRA Vietnam It is common that when the market in major cities is saturated, investment flows move to emerging markets which have the room and potential for growth. Emerging tourism destinations such as Binh Dinh and Ninh Thuan are interesting for both buyers and investors. Apart from investing in industrial zones and housing, real estate developers are flooding into coastal urban areas due to their high potential of development and profit. Profit in coastal urban projects now can be anywhere from 8-10 per cent yield, while this is just around 4-5 per cent for housing. The land plot segment in 2021 may recover and increase compared to 2020, mainly in neighbouring provinces such as Long An, Dong Nai, and Binh Duong. Nguyen Van Dinh - Vice chairman, Vietnam Association of Realtors The wave of moving to provinces neighbouring Hanoi will remain a trend in upcoming years due to affordable prices. Thanks to infrastructure and transport development, real estate projects in Haiphong, Thai Nguyen, Bac Ninh, Hung Yen, and Hai Duong are springing up like mushrooms. The presence of foreign investors in industrial zones in such provinces, particularly Samsung in Bac Ninh and LG in Haiphong – along with the entrance of thousands of foreign and local workers – have raised the demand on industrial property, homes, apartments, and other services. Supply has been much more than demand and moved ahead of the development of industries. However, it is not concerning for now because land potential is still good. Luu Van Thanh - General director, Minh Thanh Co., Ltd. Being recognised as a first-tier city since 2019, real estate in Hai Duong has developed well with a lot of transactions, and prices have increased by 20-30 per cent over last year. Most property giants have already been developing their projects here like Ecopark Hai Duong, Nam Cuong Western, and Apec Mandala Wyndham. Thanks to infrastructural development, industrial zones expansion, and the huge investment into large projects, real estate in Hai Duong has developed inclusively in all segments like industrial property, shop houses, apartments, and land plots. The number of transactions is maintained, even amid the pandemic, and construction companies like my Minh Thanh have not suffered a lot of damage.

VIR