The freezing of the real estate market provided space for domestic brokerage companies to emerge and take a chunk out of the market share held previously by their foreign counterparts.
Vietnam’s real estate market has been viewed as a “delicious pie” in which many foreign real estate brokers hope to obtain a slice. In the 2006-2010 period, when the real estate market was in its halcyon days, a number of foreign real estate brokers set up shop in search of opportunities, including CBRE, Savills, Coldwell Banker, Colliers International, Cushman & Wakefield, and Knight Frank. Their names were plastered across the hoardings of many if not most large-scale projects. The subsequent tough years for the market, however, saw something of a reshuffle, with the emergence of domestic brokers such as STDA, Dat Xanh Mien Bac, and V.I.C. Their growth has been strong and they compete directly with their foreign rivals to obtain their own slice of the pie.
By 2005 and 2006, along with the development of the real estate market, many consultants and research companies had already opened offices in Vietnam. Chesterton Petty, the precursor to Savills Vietnam, had been in the country since 1995. In 2007 Savills purchased Chesterton Petty Vietnam, formed Savills Vietnam, and continued to be an influential player. Foreign brokers appeared en-masse, including CBRE, Jones Lang LaSalle, Cushman & Wakefield, Setia BHD, NAI Vietnam, and Colliers International. CBRE became the largest real estate service company in the world in 2012, with more than 37,000 employees in over 300 offices worldwide. Cushman & Wakefield now has nearly 250 offices operating in 60 countries, with 16,000 employees.
Back in the boom days, most transactions were conducted by foreign companies. Promotions for various projects were held in five-star hotels and attracted a lot of investors. The Law on Real Estate Business had been introduced but local brokers lacked experience and professionalism, and investors tended to prefer foreign companies anyway. Foreign real estate brokers, therefore, had a much better time of it than domestic companies.
According to a recent report from the Ministry of Construction, the number of real estate transactions last year in Hanoi and Ho Chi Minh City totaled approximately 22,000, up 30 per cent compared to 2013, with the former seeing 11,500 and the latter about 10,400. Inventories decreased significantly and many thought the better liquidity in the market was due to the efforts of brokers, especially foreign brokers. The truth, though, is domestic brokers now account for many more transactions than in the past. Foreign enterprises have become a lot quieter on the broking front, primarily focusing on consulting and research. Only Savills Vietnam has remained in brokerage, but at a scale much lower than before.
Many domestic real estate enterprises would count 2014 as a successful year. The two biggest players, with the greatest market share, are G5 and STDA. Mr. Nguyen Tho Tuyen, General Director of STDA, told VET that the company conducted 4,212 successful transactions in the medium and high-end segments in Hanoi, both in residential projects and villas and townhouses, which represents a market share of 38.8 per cent. The company was involved in most major projects in the capital, such as Vinhome Nguyen Chi Thanh, Gamuda Gardens, Mipec Riverside Tower, StarCity Le Van Luong, Dolphin Plaza, and Vinhomes Riverside Ecological Urban Area. G5 was also prominent, appearing in most projects in Hanoi and Ho Chi Minh City. A company representative said that 2014 was a good year, with successful transactions totaling 3,450, much higher than 2013.
Mr. Tuyen said that foreign companies almost always concentrate on high-end projects only while the real estate market has become more vibrant in the medium and low-end segments over recent years. The luxury segment only started to regain some semblance of good health at the end of 2014. Companies that have been patient and overcome the difficulties, he said, have started to fare better. Foreign companies, having kept a lower profile during the difficult times, are no longer so dominant.
Flexibility and localization are two of the advantages held by local brokerage companies. Vietnam’s real estate market is, generally speaking, always in a state of flux so it is difficult for foreign brokers to adjust properly when they don’t fully understand the culture and buying habits of Vietnamese people. Because of the cultural differences, foreign companies spend a lot of time, effort and money on research to keep up with any changes.
For his part, Mr. Pham Thanh Hung, Vice Chairman of the Cen Group, said that domestic brokers have good relations with investors. They’ve become more experienced and have greater financial resources, which is why their foreign counterparts have lost their dominance. The commissions of domestic companies are also much lower than those of foreign companies, which adds to the former becoming the preferred option.
While not denying the remarkable growth of domestic players, Mr. Stephen Wyatt, General Director of Jones Lang LaSalle, said that the majority of development activity within the residential segment has been driven by domestic developers, but not in all segments. He believes that market conditions over the last five years have been challenging for all businesses involved in real estate, both foreign and domestic. “When market conditions are difficult, annual marketing budgets are one of the first items to be reduced, and we anticipate this to change when market conditions improve and developers and investors are willing to spend more money on advertising their developments,” he said.
He believes that the difficulties are temporary and foreign companies like Jones Lang LaSalle have the capability to overcome them, due to their experience, professionalism, and careful research. “Jones Lang LaSalle Vietnam has a huge amount of resources and information that are not available to local companies, and this is particularly relevant when dealing with foreign investors,” he said. “However, local companies also play an important role in the real estate market and we firmly believe there is enough business for all parties to co-exist.”