There are two factors fundamentally affecting real estate in the early part of the 21st century. First, the transition of millennials to being the predominant age group in the workforce, and second, their disposition towards urban living. Doane Kelly, Director Savills Studney and Duong Duc Hien, Director of Residential Sales, Savills Hanoi, examine the trends from the perspective of two different markets.
Preferences towards urban living have resulted to massive investments into urban cores, including within cities that were previously regarded as Tier 3. For example, Raleigh, in North Carolina, was initially not considered a desirable place to live in but has now become a thriving urban centre. Young people want to live, work and play within a close distance of each other. This is also clearly reflected in Vietnam’s market where satellite cities are gaining significant attention. Mr Hien provides a deeper insight, stating that the number of fresh graduates and people from other provinces that have chosen to stay in big cities has significantly increased the population density, which has led to travelling difficulties in such areas. In the scene where transportation remains inconvenient, young customers will value the accessibility of a residential product and surrounding amenities for their needs, whether it is for the purposes of living, studying, working, shopping, entertainment or healthcare.
Will this generation go through what every other generation has previously gone through, which is: once they’ve started a family, will they want to relocate out of the city centres, to access more space and affordable schools? The cost of private education in desirable cities can be prohibitively expensive. A lot of millennials are at the age where they may have only just started to have children or think about having children, so they haven’t faced the question yet.
According to Doane, the rise of the millennials, and their preference for urban living in developed countries is at the heart of many investment decisions right now. It’s a consideration we try to discuss with every client thinking about where to invest. On the other hand, Vietnam market is witnessing a converse trend as city residents are moving away from cities to move towards outskirt areas where satellite cities are built. The explanation for this is that the available land in big cities in Vietnam is now really rare, which makes it difficult to develop new residential projects. If there are any spaces available is, the investment would be enormous as the compensation for site clearing is huge. Hence developers hesitate to give out their money into developing inner city projects, therefore more inclined towards implementing satellite cities. Thao Dien is an example of a successful satellite city that has become a popular area attracting a significant amount of residents.
Ten years ago, it was all about advising clients on ‘the right region’ to find properties in. Now, it’s more about studying the inter-market dynamics within that region, which ultimately comes down to: ‘which specific location do I want in this region, to get the kind of talent I want?’. According to Hien, young people these days are equipped with thorough market knowledge; they understand key terms as well as the locations that can provide the best living standards and healthcare quality for themselves and their family. Hence these days we don’t start our property search with the client until we have completed an inter-market analysis. This means the actual property is becoming somewhat less important – because you’re not going to buy or lease a shiny new building that’s in the wrong location to accommodate your needs, no matter how much you like it.
On top of that, Hien also stressed the importance of developing the biological system in urban areas. Especially in developing countries such as Vietnam, where air pollution is ringing a warning alarm, thus actions for the environments should be prioritised. To address this issue, developers have started to invest in “green” elements of projects. An example of where this has been applied is the Manor Central Park project, which was developed on 200 hectares of land, half of which was used to create Chu Van An Central Park, and the other to build a residential area, which within will also have a central park to bring residents close to nature.
To conclude, the demand for the urban lifestyle for the millennial is rising gradually around the world. Aside from developing satellite cities and investing in the surrounding amenities of those projects for convenient and quality living, developers should also pay attention to preserving and developing more green areas. According to Doane, such elements could create prime living experiences, turning the projects into an escape space within the bustling cities, which eventually help to increase the value of such projects for clients.