{"id":9014,"date":"2016-03-24T16:09:36","date_gmt":"2016-03-24T09:09:36","guid":{"rendered":"http:\/\/www.siamlandbank.com\/propertynews\/property-news\/why-hcmcs-residential-market-will-prove-to-be-a-sustainable-investment\/"},"modified":"2016-03-24T16:14:52","modified_gmt":"2016-03-24T09:14:52","slug":"why-hcmcs-residential-market-will-prove-to-be-a-sustainable-investment","status":"publish","type":"post","link":"https:\/\/www.siamlandbank.com\/propertynews\/property-news\/why-hcmcs-residential-market-will-prove-to-be-a-sustainable-investment\/","title":{"rendered":"Why HCMC\u2019s residential market will prove to be a sustainable investment"},"content":{"rendered":"


\nThere are abundant opportunities in Vietnam\u2019s real estate
\nA statue of Ho Chi Minh stands in front of the City Hall building
\nBy Aidan Wee
\nJust months after the liberalisation of Vietnam\u2019s Housing Law on 1 July 2015, allowing for foreign property ownership, the majority of foreign buyers have yet to consider Vietnam as a property investment destination. Such muted response in a market highly rated by institutional investors and property developers (while individual buyers continue to invest in less competitive countries), continues to baffle.
\nOn a statistical note, the Urban Land Institute in collaboration with PricewaterhouseCoopers, rated Ho Chi Minh City (HCMC) fifth on its 2016 Asia-Pacific investment prospects ranking, behind only the likes of Tokyo, Sydney, Melbourne and Osaka.
\nTo the sceptics, an overview of Vietnam\u2019s real estate market will put everything into context. In 2008, at the height of the Global Financial Crisis, buyers were queuing up just to pick their choice units. From then on leading up to 2009, the bubble burst and things went downhill, leading to a frozen real estate market.
\nProperty prices deflated year-on-year from 2009 to 2013 before the market bottomed out in the lead-up to 2014 (prices in the primary residential market decreased as much as 40 percent over the said period).
\nIn 2014, the effect of government policies started\u00a0to kick in and consumer optimism in the market returned. Primary residential prices rebounded by as much as 15 percent from 2014 to 2015, and this trend is predicted to continue for the next five years at least.
\nExperts predict that 2016 will be another good year for Vietnam\u2019s real estate industry.
\nMore: Why 2016 will be a solid year for Vietnam real estate
\nShining star
\nAt a time when overseas property investments have lost some of their shine due to internal and external turbulence, and the repercussions of China\u2019s slowing economy is impacting countries popular with property investors, Vietnam is the one shining star amid the gloom.
\nDowntown HCMC (Image credit: Alamy\/The Guardian)
\nGiven that Vietnam, and specifically HCMC, is a new market to foreign property investors and is ideally at the start of an upward trend in its property cycle, it provides an opportunity where there are more upsides than downsides to investments, making it very competitive for investors\u2019 money. A brief look at the following reasons will easily identify the opportunities that Vietnamese real estate offers.
\nLegislatively, the revision of Vietnam\u2019s laws now allow eligible foreign buyers to legally enter the country to purchase and own residential property. The types of projects available to foreign buyers include apartments, villas and townhouses (as long as they are part of a development, and not standalone units).
\nSuch property can be leased out, traded, inherited and collateralised, firmly placing the rights of foreigners over property on the same level as locals. Tenure shall be for a period of 50 years, renewable for a nominal fee for another 50 years, very much comparable to the majority of other real estate markets, like the Philippines and Thailand.\u00a0
\nGreater affordability
\nFinancially, the general affordability of high-end residential properties allows for a lower investment quantum, creating a situation where there will be lower financial risks associated with buying Vietnam property, yet with more capital upsides.
\nAccording to a study published by the Japan Real Estate Institute in April 2015, the price comparison of HCMC is newly built high-end residential projects with other markets showed it was still much cheaper compared to other regional cities such as Bangkok, Kuala Lumpur and Jakarta.
\nPrices in HCMC are deemed relatively lower than in its ASEAN neighbours (Image credit: PeterAlanLloyd.com)
\nMeanwhile, new reforms implemented by the local government are stirring Vietnam\u2019s economy in the right direction. The government had bought back bad debts from banks stuck with very poor asset quality, and by doing so, lowered the ratio of non-performing loans to total outstanding loans (a critical long-standing problem of Vietnam\u2019s).
\nIn addition, banks are also undergoing consolidation triggered by the government to make them more effective and create better economies of scale. Above all, the reforms have created a stable local currency that is attractive for exports and foreign investments, and reined in once runaway inflation to less than one percent, allowing for significant credit growth; these augur well for the real estate industry.
\nThe restructuring of state-owned enterprises rife with mismanagement have seen their real estate portfolios (a non-central part of business operations), once used as an excuse for diversification, removed, thus strengthening the real estate market with much-needed creditability.
\nMore: Vietnam\u2019s budding \u201cSilicon Valleys\u201d lead real estate growth and innovation
\nWhere foreign trade relations and bilateral ties are concerned, Vietnam\u2019s trade liberalisation policy has allowed it to be a beneficiary of recently concluded treaties. With the Trans Pacific Partnership (TPP), Vietnam\u2019s economic connectivity to major global markets will improve by leaps and bounds. With the lowering of import tariffs of \u201cmade-iin-Vietnam\u201d products, more industries will relocate and setup shop in Vietnam.
\nThis will accelerate the country\u2019s growth as a manufacturing powerhouse, made possible by its relatively cheaper labour (when compared to its illustrious neighbour China), and ease of access to port facilities (made possible by its long eastern coast lines and broad river networks).
\nWhen fully implemented, the signed ASEAN Economic Community (AEC) will perpetuate a single market in Southeast Asia, allowing Vietnam to experience an increase in GDP, jobs and wages. All these factors will work in Vietnam\u2019s favour to greatly improve its standard of living, increasing the demand for quality housing, and creating a more vibrant and sustainable real estate industry.
\nHopes and dreams
\nDemographically, Vietnam\u2019s favourable situation as depicted in demographic statistics paint a rosy outlook for the real estate market. With a median age of 30, a rapidly growing middle-class forecasted to reach 40 million people by the year 2020, and a high urbanisation rate of 3.5 percent per annum, will create a huge demand for quality housing in the urban centres.
\nThe median age in the HCMC is 30, and the middle class is rapidly growing (Image credit: Vietnam Gunners)
\nEvident of one of the fastest rates of urbanisation in Asia, many Vietnamese are abandoning country life to seek a better future in the cities, so much so that it is putting a strain on infrastructure. According to government figures, there is a shortfall of housing supply to meet the future demands of Vietnam\u2019s young population.
\nSocially, Vietnam makes a good retirement home, with its low cost of living (even in the cities, when compared to its peers) and low inflation rate; you will be able to stretch and get more out of your retirement fund with cheaper accommodation, healthcare and entertainment, for example. Another important factor will be safety, and in Vietnam, most serious crimes are dealt with by capital punishment.
\nMore: What\u2019s next for HCMC\u2019s vanishing cultural heritage?
\nThis explains why Vietnam enjoys a low serious crime rate, while most of the crimes we hear about are usually just petty in nature such as snatch theft and burglary. Moreover, Vietnam, by virtue of its ideal geography, allows the abundance of leisure travel from North to South; nature reserves, beaches, mountains, highlands and river deltas provide much needed variety and change in scenery.
\nLast but not least, HCMC specifically, suffers from no natural disasters; you will not get to experience earthquakes, typhoons, volcanic eruptions or drought (this also mitigates the investment risk of buying tangible assets such as real estate).
\nMountains, highlands and river deltas are present in HCMC (Image credit: azamaraclubcruises.com)
\nStable and safe
\nPolitically, Vietnam is a nation governed by a single party, the Communist Party of Vietnam. The positive aspect of such a system (evident in China and to a certain extent Singapore), is the stable climate that government policies are allowed time to take root and its effectiveness evaluated; policy-making is coherent and consistent, guided by a single doctrine despite any change in leaders.
\nEconomic progress will be forthcoming, and the real estate market will be influenced accordingly (this once again lowers the risk of investment). This is in contrast to the political upheavals experienced by other regional countries such as Thailand, Malaysia and Myanmar, where economic progress stalls every time there is conflict or when a new party comes into power.
\nAll the different aspects above, aligned with one another, have started simmering. According to the HCMC Real Estate Association, since the new laws were put into effect, more than 1,000 transactions from foreign buyers were registered for HCMC properties, while only 250 foreigners bought between the period of 2009-2013 for the whole Vietnam. As Vietnam as a real estate destination catches the global wave of investments, fence sitters will start to make advances into the market, and the early movers (foreign buyers) who invested early will reap the benefits of investing early.
\nInvestors in HCMC\u2019s properties can generally expect a competitive gross rental yield of 6 to 8 percent (as compared to other regional investment destinations) and good mid- to long-term capital gains. Based on 2015\/16 forecasts, residential property prices are set to increase by 5 to 8 percent per annum in the near future. These all present a healthy return on investments for the individual investor, and provide a good opportunity not to be missed.
\nThis article originally appeared in the print version of The PropertyGuru News & Views. The full online version was published by Property Guru.com.sg on 24 March 2016.
\nAidan Wee is managing director of Somot Realty, a boutique real estate agency for foreigners in Vietnam. He is a licensed property salesperson registered with the Council of Estate Agencies in Singapore.
\n
\nSource : property-report.com
\nRead more…Why HCMC\u2019s residential market will prove to be a sustainable investment<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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