Solving Tech-Related Problems: An Overview of Vietnam’s High-Tech Industry

Last year we saw movement restrictions cause office rents to drop across Southeast Asia. As the region’s economies entered a recession, discretionary consumer spending fell as many chose to wait until the economic storm was over.

As office rents fell in Singapore, Bangkok and Hong Kong, Ho Chi Minh City (HCMC) saw a 1.7% rise instead. Vietnam’s residential housing market has experienced even higher growth rates. According to Cushman and Wakefield, apartment prices in HCMC increased by 90% from 2017 to 2020, of which 12.8% in 2020 alone.

The bullish nature of the Vietnamese real estate market can be attributed to its economic growth over the past year. As the region battled the pandemic, Vietnam fared relatively unscathed – registering just 2,600 cases and 35 deaths in early April 2021.

Avoiding widespread economic disruption, Vietnam’s GDP grew 2.9% in 2020, in stark contrast to the contractions in Asia.

However, the country is now grappling with a record epidemic as authorities scramble to vaccinate the population to avoid an economic crisis and a rollback of its efforts over the past year.

Vietnam’s continued economic growth has created a growing middle class. Limited investment options have led locals to turn to real estate. As demand exceeded supply, prices soared.

Gaps remain in the proptech scene in Vietnam

Despite its optimistic sentiments, the Vietnamese real estate sector is far from the full article. There are issues that hinder its growth.

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

Forged ads are commonplace on digital property platforms. The first proptech companies were online classified sites hosting listings with transaction prices that did not match actual numbers.

As these sites operated on an advertising-based revenue model, the accuracy of the listings was the least of their concerns. This resulted in fraudulent listings where lower quality properties were traded instead.

A real estate superapp?

Local proptech company Propzy is looking to change that. The Softbank-backed company operates a comprehensive real estate platform. Through offline (agents) and online (market) methods, he amassed a wealth of data including asking prices and closing prices for specific properties. This data is used to improve pricing accuracy and help pre-apply for home loans.

With its platform covering almost every stage of a real estate transaction, Propzy has processed over $ 1 billion in transactions while creating what turns out to be a real estate superapplication. After raising a US $ 25 million round of Series A funding in June 2020, DealstreetAsia reported the company is looking to raise US $ 50 million in a Series B funding round by the end of 2021.

Vietnam also does not have an accreditation or accreditation body for real estate agents. It is therefore difficult to find a trusted agent in the country.

Propzy tackles this by providing a scoring system for its agents. Similar to how drivers are rated by ridesharing platforms, such a feature prompts agents to avoid breaches while increasing consumer confidence, the latter of which is crucial given the high capital outlays for real estate transactions.

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

Alternative financing

According to the World Bank, Vietnam’s emerging middle class, which currently represents 13% of the population, is expected to reach 26% by 2026. With rising income levels, more and more people are turning to real estate investment . However, his large down payment is a nuisance to many middle-class investors.

The Infina personal finance platform aims to democratize access to real estate investments by allowing users to invest in fractional real estate funds. Launched in January 2021 and fresh out of its $ 2 million seed fundraiser, the self-proclaimed “Robinhood of Vietnam” requires only a minimum contribution of $ 25 to start investing.

In addition to allowing the middle class to invest in properties, alternative financing options also give them the ability to own a property at a fraction of the total cost.

The startup Y Combinator Homebase acts as a co-investor alongside its clients in a real estate transaction, allowing them to buy it with a lower initial investment.

After which clients can either buy the remaining equity of Homebase until full ownership or sell the property for their share of the proceeds. In the meantime, buyers pay Homebase a rent corresponding to the company’s stake and are allowed to live in or rent it.

Holders want to enter

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

Incumbents have recognized the threat posed by proptech startups and are taking steps to digitize their offerings. Vietnamese real estate giant VinGroup launched its OneHousing platform last year, which it says will become a unique platform serving buyers, sellers and investors.

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

Outlook for Proptech in Vietnam

While the current record virus outbreak in HCMC could cause the Vietnamese real estate industry to contract, it will likely be a temporary bump.

A survey by real estate news portal Mingtiandi found that 70% of real estate companies intended to increase their investments in pro-tech solutions.

Besides a move towards digitalization, strong macroeconomic trends resulting from a young and tech-savvy population with increasing ease position Vietnam’s proptech technology industry as a sector to watch for the future.

Featured Image: Photo by Chor Tsang at Unsplash

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