Last year, we saw movement restrictions causing office rents to plummet across Southeast Asia. As the region’s economies entered recession, consumer discretionary spending fell as many opted to wait out the economic storm.

While office rents fell in Singapore, Bangkok and Hong Kong, Ho Chi Minh City (HCMC) witnessed a spike of 1.7 per cent instead. Vietnam’s residential housing market witnessed even higher growth rates. According to Cushman & Wakefield, apartment prices in HCMC grew by 90 per cent from 2017 to 2020, including by 12.8 per cent in 2020 alone.

The bullish nature of Vietnam’s real estate market can be attributed to its economic growth over the past year. While the region battled the pandemic, Vietnam escaped relatively unscathed – registering only 2,600 cases and 35 deaths as of early April 2021.

By avoiding widespread economic disruption, Vietnam’s GDP increased by 2.9 per cent in 2020, a stark contrast to contractions across Asia.

However, the country is now battling a record-breaking outbreak with authorities scrambling to innoculate the population to prevent an economic crisis and an unravelling of its efforts over the past year.

Vietnam’s continued economic growth has created a rising middle class. Limited investment options have resulted in locals turning to real estate. With demand outstripping supply, prices have soared.

Gaps remain in Vietnam’s proptech scene

Despite its bullish sentiments, Vietnam’s real estate industry is far from the complete article. There are issues within handicapping its growth.

From misinformation to a lack of financing options, local startups are leveraging technology to solve these problems. An estimated 100 proptech startups are seeking to capture a market reportedly worth US$500 million.

Falsified listings are a common occurrence on digital property platforms. Early proptech companies were online classified sites hosting listings with transaction prices that did not align with actual numbers.

As these sites operated on an ad-based revenue model, the accuracy of listings was the least of their concerns. This gave rise to fraudulent listings where lower-quality properties were transacted instead.

A property superapp?

Local proptech firm Propzy is seeking to change this. The Softbank-backed company operates a full-stack real estate platform. Through offline (agents) and online (marketplace) methods, it has amassed a wealth of data including the asking prices and closing prices of specific properties. This data is used to improve pricing accuracy and assist in pre-application for housing loans.

With its platform covering almost every stage of a property transaction, Propzy has handled over US$1 billion worth of transactions while building what is turning out to be a property superapp. Having raised a US$25 million Series A funding round in June 2020, DealstreetAsia reported the company is seeking to raise US$50 million in a Series B funding round by the end of 2021.

Vietnam also lacks a licensing or accreditation body for real estate agents. This makes it a challenge to find a trustworthy agent within the country.

Propzy tackles this by providing a rating system for its agents. Similar to how drivers are rated by ride-hailing platforms, such a feature incentivises agents to avoid violations while increasing consumer trust, the latter crucial given the high capital outlay for real estate transactions.

John Le, CEO of Propzy (Image Credit: Propzy)

Alternative financing

According to the World Bank, Vietnam’s emerging middle class, currently accounting for 13 per cent of the population, is expected to reach 26 per cent by 2026. With income levels rising, more are turning to real estate investing. However, its large capital outlay hinders many middle-class investors.

Personal finance platform Infina aims to democratise access to property investments by allowing users to invest in fractionalised real estate funds. Launched in January 2021 and fresh off its US$2 million seed fundraise, the self-proclaimed “Robinhood of Vietnam” only requires a minimum contribution of US$25 to start investing.

Besides allowing the middle-class to invest in properties, alternative financing options also offer an opportunity for them to own a property at a fraction of the total cost.

Y Combinator startup Homebase acts as a co-investor alongside its customers in a property transaction, allowing them to purchase it with a lower initial capital outlay.

Following which customers can either purchase the remaining equity from Homebase until full ownership or sell the property for their portion of the proceeds. In the meantime, buyers pay rent to Homebase that corresponds to the company’s stake and are allowed to live in or rent it.

Incumbents want in

As a highly fragmented industry with low customer satisfaction, the Vietnamese property industry is ripe for disruption.

Incumbents have recognised the threat posed by proptech startups and are taking measures to digitalise their offerings. Vietnamese property giant VinGroup launched its OneHousing platform last year, which it envisions will become a one-stop platform serving buyers, sellers and investors.

With a large customer base to tap into and deep pockets, VinGroup could pose a threat to full-stack proptech startups such as Propzy.

Outlook for Proptech in Vietnam

While the current record-breaking virus outbreak in HCMC could result in a contraction of Vietnam’s property industry, it is likely to be a temporary bump.

A survey by real estate news portal Mingtiandi found 70 per cent of real estate companies intend to scale up their investment in pro-tech solutions.

Besides a shift towards digitalisation, strong macro trends arising from a young and tech-savvy population with growing affluence positions the Vietnamese proptech industry as one to keep our eye on in the future.

Featured image: Photo by Chor Tsang on Unsplash 

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Source: https://fintechnews.sg/53171/proptech/proptech-vietnam/