Vietnam’s quick rate of urbanisation is putting pressure on the residential market.
Vietnam is undergoing rapid change. Underpinned by the economy which is propelling forward at a rate of knots, the landscape of the country is changing too. It is estimated that only 20 percent of the population lived in an urban setting towards the end of the 1980s. However now this figure has reached 34 percent. Subsequently the amount of urban pockets has increased too. Increasing at about two percent every year at just shy of 3,000 square kilometres of the country in 2010.
It is believed that 150,000 people move from rural areas to both Hanoi and Ho Chi Minh City annually. Seeking employment opportunities as technological advances have meant that many of the country’s industries are less labour intensive. For example within agriculture and fishing.
Smaller households
At the same time the real estate outlook has adapted. New projects started to spring up to meet the rise of urbanisation. However many were geared to the upper end of the market. There was a move away from this with housing built on a mass scale and to satisfy the changing ways that people live. Previously the household set-up consisted of three generations. This has started to change as the average number of people per household has decreased from 4.82 persons in 1989 in urban areas to 3.6 persons some 15 years later.
This pattern is very traditional across over countries as they have developed. Although Vietnam is ahead in the region as Indonesia, the Philippines and Malaysia all have larger average household sizes. The rise of Vietnam’s single living requires smaller units. Particularly as Vietnam has witnessed a doubling of single urban households between 1999 and 2014.
This creates an opportunity for developers. There is demand for smaller units sizes and recently there have been calls for more compact living in Ho Chi Minh City. But according to research from Un-Habitat in 2015 about 27 percent of people living in an urban setting reside in low quality housing. Couple this with a shortage of housing and there is a real strain.
High rise properties are one solution in providing enough supply. Both Ho Chi Minh City and Hanoi have started to rise upwards. But it is proving to be a tough balancing act: providing enough housing but also ensuring that units are sufficient in size. As urbanisation is set to continue the government have intervened by setting a target to increase units sizes. Averaging at 19 square metres in 2015 they want this to be 22 square metres by 2020. Therefore the coming few years will be an interesting chapter in Vietnam’s next urbanisation story.
