BACKGROUND
Hanoi stands out as a key hub for the real estate industry in both Vietnam and Asia With its significant growth potential, the Hanoi real estate market has emerged as a preferred destination for both domestic and foreign investors By the end of 2007, the market demonstrated a remarkable recovery from a prolonged stagnation, igniting renewed interest and activity.
“It is the third fever” It is easy to see that price of all properties is rising strongly
To understand the current state and future outlook of the Hanoi real estate market, a thorough analysis of various market factors is essential Despite experiencing significant fluctuations in the past, Hanoi remains a primary market, attracting considerable demand and foreign investment due to favorable policies The market is expected to continue its upward trajectory in the coming years, presenting both opportunities and challenges Key issues under public discussion include supply shortages, rising prices, speculation, market ambiguity, and the impact of new regulations However, there is a notable lack of comprehensive and systematic research on the Hanoi real estate market, highlighting the need for more in-depth studies.
Property consultants play a crucial role in the real estate market, acting as conductors in this dynamic industry In Hanoi, the property consultancy sector has emerged as a lucrative business, driven by rapidly increasing and diversified demand Key clients include property developers, domestic and international investors, and larger corporations, all seeking expert guidance Foreign consultancy firms have established themselves as market leaders due to their strong reputations, professionalism, and ability to offer a wide range of services Meanwhile, Vietnamese consultancy companies are striving to enhance their capabilities to capture market share, although they often lack clear strategies to navigate the competitive landscape filled with opportunities and challenges Notably, there is a lack of professional research focused on property consultancy in Vietnam, particularly in Hanoi.
OBJECTIVES OF THE STUDY
The objectives of this thesis focus on:
The thesis aims to analyze the current state of the Hanoi real estate market and forecast its future trends To achieve this overarching goal, it specifically targets key issues affecting the market today.
Analyse the effect of macro-environmental factors such as: Political, economic, social, legal and policy
This article examines the current characteristics of demand and supply in the Hanoi real estate market, highlighting the key factors that influence demand, supply, and pricing It also offers insights and forecasts for the market from 2007 to 2012, providing a comprehensive overview of potential trends and developments in the coming years.
This thesis aims to analyze the property consultancy market in Hanoi, focusing on key issues and comparing foreign and Vietnamese consultancy firms To achieve this overarching goal, the research emphasizes specific objectives that delve into the nuances of the industry.
Analyze the development of property consultancy in Hanoi
Present and analyze key services which are offered in Hanoi
Analyze the demand, key clients and customer behaviour in determining choice of consultant
Analyze the market share, supplying competence and internal environment of property consultancy companies in Hanoi
This thesis presents an analysis of the real estate market and property consultancy in Hanoi, offering strategic solutions for Vietnamese property consultancy companies to enhance their business performance.
SIGNIFICANCE OF THE STUDY
This thesis presents a comprehensive analysis of the key issues currently affecting the Hanoi real estate market, along with insights into its future outlook for the coming years.
Lay the foundation for researches on Hanoi real estate market in a methodical, comprehensive and systematic view This thesis will be a good basis for further researches
Systematize separate researches on Hanoi real estate market
This article aims to clarify key public discussions surrounding critical economic issues, including rising prices, supply and demand trends, the impacts of economic growth, the financial market, foreign investment, and the implications of new policies.
Help to provide useful and selective information for making decisions related to the real estate business and investment as well as new policies
The presentation and analysis for key issues of property consultancy in Hanoi at this present time in this thesis will has the following significances:
Lay the first foundation for research on this subject
Help to understand the role of consultant in real estate market
Bring deep knowledge on property consultancy in Hanoi
Provide useful and selective information for clients, investors and property consultants
Help to make some strategic solutions for property consultancy companies, especially Vietnamese companies, which are playing in a big game full of opportunities but also full of challenges
SCOPE AND LIMITATIONS OF THE STUDY
This study analyzes the key issues of the Hanoi real estate market and property consultancy, offering strategic solutions for Vietnamese consultancy firms to enhance their business amidst numerous opportunities and challenges By concentrating on fundamental aspects rather than specific branches of the market, the research provides a comprehensive perspective that informs the recommendations for improving consultancy practices in Hanoi.
METHODOLOGY
Research Method
This research employed both qualitative and quantitative methods to analyze the real estate market It utilized a descriptive approach, incorporating observations from the market and consultancy businesses The qualitative aspect focused on describing market dynamics and the perspectives of real estate consultants and clients regarding future trends In contrast, the quantitative component involved statistical data and questionnaires designed to yield numerical results, allowing for effective grouping and analysis.
Data Collection and Analysis Method
The research involved a review of existing literature, primarily sourced from press articles and real estate industry magazines Additionally, relevant information was drawn from several master's theses in related fields Due to a scarcity of published research and data on the topic, conducting an empirical study was not feasible.
This research utilized primary data gathered from the real estate market and informal discussions with staff members from selected companies, supplemented by secondary data from publicly available sources such as websites, brochures, marketing materials, and market reports Additionally, figures were sourced from the Hanoi Statistics Department and other internal resources To ensure accuracy, the data obtained from these supplementary sources was verified with the relevant individuals or departments before being utilized.
The study primarily relied on data gathered from interviews and questionnaires, utilizing observation as a supplementary method To enhance response rates and data volume, questionnaires were administered face-to-face rather than mailed, with some conducted via telephone and email Informal interviews and structured surveys were carried out with both consultants and clients, where each consultant was considered equivalent to ten clients The consultants were categorized into domestic and international property consultants, as well as legal and accountancy firms On the client side, participants included property companies, developers, domestic institutional investors, international investors, and large domestic corporations Two distinct questionnaires were developed: one targeting property consultants and the other for clients, featuring numbered questions and multiple-choice responses to facilitate data collection.
THESIS’S LIMITATION
This thesis focuses only on key and basic issues of Hanoi real estate market recently and in the near future
Professional property consultancy is still quite new in Vietnam, so representative features may be not popular It is still new and becoming developed dramatically in 5 past recent years
The questionnaire aims to interview key clients and consultants; however, the absence of some relevant interviewees may lead to less accurate information collection and analysis.
Other restriction is that recommendation is for only key strategic solutions that help Vietnamese property consultancy companies to improve their business.
OUTLINE
The thesis is divided into three chapters:
Chapter 2 : Hanoi Real Estate Market
Chapter 3 : Property Consultancy in Hanoi
LITERATURE REVIEW
REAL ESTATE MARKET
1.1.1 The Definition for Real Estate & Real Estate Market
Real estate refers to land and anything permanently attached to it, like buildings, while "real property" specifically denotes the ownership rights associated with that land.
The real estate market is a dynamic arena where transactions involving buying, selling, leasing, and investment in properties occur, influencing the pricing and volume of real estate exchanged It is primarily categorized into three segments: residential, commercial, and industrial, based on their intended use Key characteristics of the real estate market include decentralization, an imperfect market structure, limited supply, and a slow response to changes in demand.
1.1.2 The Main Participants in Real Estate Market
Owner/User - These people are both owners and tenants They purchase houses or commercial property as an investment and also to live in or utilize as a business
Owner - These people are pure investors They do not consume the real estate that they purchase Typically they rent out or lease the property to someone else
Renter - These people are pure consumers
Developers - These people prepare raw land for building which results in product for the market
Facilitators - This includes banks, real estate brokers, lawyers, and others that facilitate the purchase, sale and lease of real estate
Government - Affect the real estate market by making, implement and control the policies related to real estate
The market consists of two primary sides: the demand side, which includes owners, users, and renters, and the supply side, represented by developers Additionally, facilitators and government entities play a crucial role in bridging both sides of the market.
The demand for real estate indicates the quantity of properties that buyers wish to purchase This quantity demanded varies with price, illustrating the real estate demand relationship Key factors influencing real estate demand include economic conditions, interest rates, and consumer preferences.
Cost and availability of credit
The supply of real estate indicates the market's capacity to offer properties, with the quantity supplied reflecting the amount sellers are willing to provide at specific price points This relationship between price and the volume of real estate available is referred to as the supply relationship Key factors influencing real estate supply include various market determinants.
Real estate development and business costs
The diagram illustrates the housing supply dynamics, with existing stock on the left and new flow on the right Initially, the equilibrium price (Ro) is established where the supply of existing housing stock (SH) meets housing demand (D) This rent is converted into value (Vo) through the discounting of cash flows, calculated as perpetuity by dividing current rents by the discount rate This value is then assessed against construction costs (CC) to identify profitable opportunities for developers The intersection of construction costs and housing service value determines the maximum new housing starts (HSo) Subsequently, the current period's housing starts are added to the available housing stock, shifting the supply curve (SH) to the right by the amount of HSo in the following period.
Figure 1.1: The Adjustment Mechanism of Real Estate Market
1.1.6 Line of Real Estate Related Business
Corporate real-estate management and property operators
Service real estate/Social real estate
Open-end real estate funds
Closed-end real estate funds
Share-based vehicles eg REITs
Architecture and planning (not engineering and planning specialists)
THE PROPERTY CONSULTANCY
Main reasons consultants are hired are:
When clients come knocking upon the door of a consulting firm, they are looking for something they have not the capacity to do or undertake in their own firm
Figure 1.2: Traditional and Modern View of the Real Estate Market
The main distinction between the traditional and modern perspectives of the real estate market lies in the emergence of international influences and property consultants In underdeveloped markets, the absence of international scope is evident, while in well-developed markets, the presence of global factors and professional advisors becomes significant.
Property markets can be assessed based on their maturity, which is determined by factors such as the diversity of user and investor opportunities, the adaptability of property interests, market accessibility, and the presence of information and research systems Additionally, professionalism and standardization of property rights and practices play a crucial role in market maturity Typically, these markets evolve towards structures and practices similar to those found in the fully developed property markets of major financial centers worldwide A mature market generally exhibits these characteristics, indicating its advanced stage of development.
Openness to non-local players
More transparency in the functioning of the market
A wide use of sophisticated valuation procedures
As the real estate market matures, various professionals from different disciplines, such as lawyers, accountants, and management consultants, are entering the industry and providing services traditionally offered by real estate specialists This trend indicates a growing diversification of service providers, with more firms expanding their offerings to include real estate-related services that were previously outside their scope.
Consultants typically provide services across five key business areas: valuation, investment, leasing, sales, management, and corporate services These categories have been further refined to encompass various sub-markets, such as property management, which is segmented into residential, office, and shopping center sub-groups.
ENVIRONMENTAL ANALYSIS
Environmental scanning is a crucial business management strategy that involves collecting information from the surrounding environment to maintain a sustainable competitive advantage To effectively leverage this advantage, companies must adapt their strategies and plans based on the insights gained from environmental scanning While it primarily focuses on the macroenvironment, it also encompasses industry analysis and the internal environment of the company.
Conducting external analysis during market research provides an overview of various macro-environmental factors crucial for companies to consider This strategic tool aids in understanding market growth or decline, assessing business positioning, and determining potential operational directions Commonly used models for this analysis include PEST, STEP, STEEP, PESTEL, PESTLE, LEPEST, STEEPLE, and STEEPLED Key macro-environmental factors play a significant role in shaping business strategies and outcomes.
Political factors include areas such as tax policy, employment laws, environmental regulations, trade restrictions and tariffs and political stability
Economic factors are economic growth, income, investment…
Social factors often look at the cultural aspects and include: population, lifestyle, social issues, the habits of the consumer …
Legal factors refers to government legislation that places constraints or obligations upon a business; businesses must adapt to changes in the law quickly in order to avoid prosecution
Industry analysis involves examining a specific sector to understand its fundamental characteristics and external factors that influence it This process includes defining the industry, identifying key economic traits, assessing forces of change, and evaluating critical survival factors to determine the industry's overall attractiveness A widely recognized method for conducting industry analysis is Porter's Five Forces framework, which aids in strategic business development.
Figure 1.3: Porter’s Five Forces Model
Figure 1.4: Another Model of Industry Analysis 1.3.3 Internal Analysis
An internal environmental scan assesses an organization’s current capabilities, including its infrastructure, hardware, personnel, and structure, to identify gaps compared to future needs for achieving strategic goals This analysis involves evaluating resources, core competencies, and value chain activities, as well as reviewing financial performance Additionally, it highlights key result areas, current strategies, and objectives essential for guiding the organization’s future direction.
Firms possess both tangible and intangible assets, with tangible assets including financial, physical, human, and organizational resources, while intangible assets encompass technological capabilities and brand reputation These resources serve as essential inputs for producing goods and services A firm's competitive advantage is largely determined by its knowledge base and the effective utilization of its resources Core competencies, which are unique resources and capabilities, play a crucial role in establishing a competitive edge When these resources contribute to developing capabilities and core competencies, they hold strategic value, ultimately leading to sustained competitive advantage.
SWOT analysis is a strategic development tool that identifies internal strengths and weaknesses while assessing external opportunities and threats This analysis is crucial for successful businesses, as it enables them to leverage their strengths, address weaknesses, and safeguard against vulnerabilities By continuously monitoring the business environment, companies can quickly identify and capitalize on new opportunities, gaining a competitive edge Ultimately, a thorough SWOT analysis allows managers to formulate effective strategies that promote organizational success.
HANOI REAL ESTATE MARKET
MACRO-ENVIRONMENTAL FACTORS
Hanoi, situated in the heart of the Red River Delta in northern Vietnam, serves as the country's political, economic, and cultural capital As the second largest city in Vietnam, it plays a crucial role in driving socio-economic development and international integration Recently, Hanoi has achieved significant progress across various sectors, highlighting its potential as a thriving hub for economic growth.
Hanoi, the political capital of Vietnam, is known for its stability and security With Vietnam's recent membership in the WTO and the UN Security Council, the country is now better integrated into the global community These milestones serve as a foundation for Vietnam's socio-economic development.
With 3.3 million people, Hanoi is a populous city with young population, the population growth rate is high, the high population density especially in the inner districts, that causes great pressures on local land usages, housing, areas for retail and leisure…
Hanoi is home to a growing number of international and Vietnamese political, economic, and social organizations, driving a rising demand for office, commercial, and industrial properties.
Hanoi is experiencing a significant rise in tourism, with visitor numbers reaching 5.9 million in 2006 and growing at an annual rate of 15% This surge in domestic and international travelers has heightened the demand for various accommodations, including hotels and serviced apartments, as well as restaurants, commercial and leisure centers, and public spaces.
Overpopulation in Hanoi results in excessive strain on properties, leading to their deterioration and rapid depreciation The limited lifespan of these properties is attributed not only to this overload but also to construction quality and unfavorable natural conditions As a result, frequent repairs and maintenance are necessary, with many buildings requiring reconstruction or rebuilding within just 15 to 20 years.
Hanoi, the capital of Vietnam, serves as the nation's cultural, political, and economic hub, boasting the highest Human Development Index among its cities Its unique geography, rich history, and vibrant culture foster a modern and liberal lifestyle among Hanoians, who embrace and uphold a "cultural lifestyle" with strong support from the local community.
Hanoians prioritize spending on shopping, entertainment, and particularly accommodation, reflecting their tendency to invest in durable and stable assets like real estate This consumer behavior significantly benefits Hanoi's real estate market, highlighting a strong demand for long-lasting properties.
GDP 4.12 bil 4.58 bil 5.09 bil 5.68 bil
Hanoi's GDP is growing at an impressive annual rate of 11.5%, driving a heightened demand for commercial and industrial properties This economic growth translates into expanded manufacturing and trading activities, as well as a rise in the number of businesses operating in the city Consequently, Hanoi is currently facing a significant shortage of essential spaces, including offices, hotels, retail showrooms, factories, workshops, and warehouses.
A 12% annual increase in GDP per capita significantly boosts residential demand; however, recent accommodation projects have yet to fully address the diverse housing needs of the population.
Hanoi has emerged as a prime destination for foreign investment, boasting a remarkable annual FDI growth rate of 15% The city's accession to the WTO has opened unprecedented opportunities for investors, particularly in the real estate sector Notable successful projects include Ciputra International City, Pacific Place, and Golden Westlake, with exciting upcoming developments such as Keangnam Landmark Tower, Hanoi Plaza Hotel, and West West Lake Urban.
Hanoi's real estate market has been significantly influenced by foreign investment, evident in major developments like Yen So Park and the Red River New Urban Area, alongside numerous small and medium-sized projects that yield positive outcomes.
In general, foreign investment in Hanoi goes up along with the increase in scale and number of businesses, especially foreign businesses, which leads to higher demands for properties
Foreign capital inflow helps increase the domestic economy’s purchasing power and volume, so demand for properties increase in general
As foreign investment in Vietnam continues to grow, the influx of foreigners visiting, working, or residing in the country is also on the rise This demographic is often willing to pay premium prices for accommodation, leading to an increased demand for high-end properties.
Foreign investment in real estate addresses capital shortages for projects, accelerating their development Currently, foreign investors often collaborate with domestic real estate firms and developers on significant projects Local partners possess valuable market knowledge and connections to secure major city projects, while foreign partners bring financial resources, advanced technology, and high-level management expertise Ultimately, foreign investment enhances the real estate supply capacity of the economy.
However, foreign investment also has side effects as follow:
Foreign investment in real estate heightens the market's reliance on external capital Consequently, if this influx of foreign funds diminishes or is removed, the real estate market could face significant challenges and decline.
Foreign investment can cause price to increase, which makes it more difficult for demand and supply to balance
Foreign investment without good management may lead to overproduction and ineffective investment
Real estate market in Hanoi is affected strongly by legal and policy factors as follow:
HANOI REAL ESTATE MARKET
Hanoi is one of the most densely populated cities, with a population of over 3.3 million people and an average annual growth rate of 2.7% The city's population is predominantly young, with approximately 3,490 people per square kilometer living in poor conditions, particularly in the inner districts where 75% of the population resides The urbanization rate in Hanoi has been steadily increasing, from 57.7% in 2000 to 66% in 2005, and is projected to reach 76% by 2010, driven by an influx of people migrating from neighboring provinces.
The growing international integration in Hanoi has significantly increased the number of foreigners residing and working in the city These individuals are now allowed to rent homes, and upcoming policies may soon enable some to purchase properties Additionally, favorable regulations for overseas Vietnamese have encouraged many to return to Vietnam for work and residence, although the current number of overseas Vietnamese buyers remains low despite their eligibility to buy homes.
Recent trends show a significant rise in per capita and household income, along with an increase in high-income individuals Traditionally, purchasing a home is viewed as a crucial milestone in life, particularly for married couples In Hanoi, many individuals prioritize saving for homeownership, often with support from their families Additionally, recent financial assistance policies from banks and credit agencies have created more opportunities for people to acquire properties.
According to some estimation, Hanoi needs about 1.000.000 accommodations in the period of 2006-2010 In the present situation the housing supply still can’t meet the housing demand
Table 2.3: Transaction Rate by Kind of Property
Property High Value Transaction Rate
*Land, houses, villas in the inner districts
*Houses, villas, apartments in new urban area
The demand for land, houses in inner districts, and old apartments remains high, particularly in urban areas, despite the limited supply of new properties Most existing properties have been in use for a long time and are ready for immediate occupancy As urban development trends shift residents toward new areas, the availability of inner-city properties is expected to decrease, leading to increased prices due to the high demand and low supply Consequently, there are few transactions involving buying and selling these properties, although rental and leasing activities, especially in city centers, continue to thrive Recently, there has been a growing interest in acquiring well-maintained old villas to cater to the needs of foreigners and overseas Vietnamese.
Hanoi is actively promoting the relocation of residents from inner districts to new urban areas, reflecting a significant trend in the city's housing demand The appeal of these new urban developments lies in their comprehensive services and improved living environments These areas provide not only modern accommodations but also serve as a viable solution for resettlement for individuals whose properties have been affected by city projects.
In Vietnam, the real estate market is categorized into high-class, medium-class, and low-income apartments The majority of Vietnamese consumers tend to purchase or rent medium and low-class apartments, while affluent individuals invest in high-class properties, including apartments, houses, and villas These high-end properties are often sold at favorable prices or leased to expatriates, reflecting a diverse housing landscape that caters to various income levels.
Hanoi currently has 131 residential projects at different stages of development, catering to a range of buyer budgets Most apartments are sold off-plan, with some condominiums offering shell units while others provide fully fitted options The majority of these residential apartments fall into the medium-class category, appealing to middle-class families due to their competitive sale prices A significant supply shortage in the market has led to off-plan units being resold multiple times before completion.
High-quality real estate projects in the region include Ciputra, Pacific Place, The Garden, Chelsea Park, The Manor, West Lake, Trung Hoa-Nhan Chinh, 93 Lo Duc, TSQ Overseas Vietnamese Village, and West West Lake Medium-quality developments feature My Dinh, Thang Long International Village, Van Quan, Linh Dam, Trung Yen, Trung Hoa, Cau Giay, Viet Hung, and Phap Van Additionally, there are projects aimed at low-income households, such as Nghia Dô-Dich Vong, Cau Dien, Xuan La, and Xuan Dinh.
Figure 2.1: Housing Supply Vs Actual Demand in Hanoi
The real estate market currently operates at two distinct price levels: the original price set by investors and the secondary market price In 2007, there was a notable surge in demand for various types of apartments, particularly high-end units in central locations, leading to faster-than-expected sales Additionally, rental and sales prices for houses and villas in new urban areas are typically 1.5 to 2.5 times higher than those of apartments in the same vicinity.
Table 2.4: Price of Sales by Grade Grade C
Table 2.5: Rental of Apartments Including Tax (Not serviced apartments) Grade C
Many medium and high-class properties are transacted and the prices increase ceaselessly because of the following reasons:
Vietnam's accession to the WTO has significantly influenced the growth of its real estate market, leading to increased payment capacity and a steady rise in demand for properties among foreign buyers This trend has played a crucial role in shaping the development of the real estate sector in the country.
Due to the sensitive relationship between real estate market and stock market, some investors have chosen to turn into investing in real estate market to preserve their capital
Legal corridor for real estate market is becoming clearer and appropriate, making it more convenient for trading than before Real estate trading Law, real estate registration Law, Land use Tax Law, accommodation Law, policies for overseas Vietnamese to buy houses… have been improved and come into effect Price frame stipulated this year by the government is about
30 to 50% higher than before The newly approved preferential finance policies for accommodations such as loans for house purchase, house or apartment purchase by installments have helped increase demands with high payment capacity
People tend to move to urban areas and new apartment buildings
In the real estate market, prices are inflated due to two distinct levels: the direct purchase price from investors and the higher prices set by intermediaries in the secondary market This inflation drives real estate costs beyond the actual value, making it unaffordable for many buyers Speculators, leveraging their experience, investor relationships, and capital, dominate the market by acquiring nearly all new supplies, thereby exerting control over pricing.
Hanoi is currently facing a significant shortage of apartment supply, primarily attributed to the slow growth of real estate development in recent years This limited availability is insufficient to meet the rising demand expected in the near future Typically, large-scale projects require a minimum of three years to become fully operational, exacerbating the supply issue.
Figure 2.2: Hanoi New Stock For 2008-2010: 7,634 units
In the next three years, the residential market is expected to face intense competition as numerous large-scale projects are set to be completed and launched With most of these developments located in new urban areas, a simultaneous entry into the market could lead to a significant decline in property prices.
Figure 2.3: Trend of Apartment & Villa Supply 2007-2020 2.2.2 Serviced Apartment Market