Global investors eye Vietnam’s real estate market.(Photo: VNA)
Hanoi (VNA) – Foreign investors cannot take their eyes off theVietnamese real estate market, one of the most dynamic emerging marketsglobally, according to an article by regional managing director, SoutheastAsia, CBRE Vikram Kohli onwww.bussinesstimes.com.sg.
“Driving its strong economic growth is an expanding middle class withthickening wallets,” the article said, adding that rapid urbanisation issupported by a young, growing and educated population, and all bode well for aneconomy with one of the world’s fastest growing gross domestic product (GDP)rate.
In addition, the World Bank has projected thatVietnam’s GDP will expand by 6.8 percent this year, fuelling big appetites ofglobal investors looking to make their mark in Vietnam’s burgeoning propertymarket. In the past three years, Vietnam has seen a significant increase in thenumber of foreign investments in the real estate sector. Developers fromSingapore, Japan and the Republic of Korea have favoured sites in downtownareas while local developers usually enter into joint venture agreements withforeign developers on the premise of optimising decision-making in site sourcingand project management.
Since 2015, the bulk of big-ticket mergers andacquisition (M&A) transactions have been championed by those investing inproperty development sites, followed by hotels, apartments and offices. This istestament to the fact that those pouring money into Vietnam are in it for thelong run.
Running alongside the strong demand forcommercial sites is the relative shortage of supply, which is especiallyprevalent in the market for prime retail and office spaces in Ho Chi Minh Cityand Hanoi. Grade A rents in Ho Chi Minh City have surged from some 35 USD persquare metre per month in Quarter 2 of 2016 to 43 USD per square metre per month in Quarter 2 of2018, or a healthy 23 percent growth.
Rental growth has been observed in Hanoi over the past two years. In the office market, an increasing presence ofinternational firms has resulted in developing areas absorbing the overflow ofoccupants. But progress in office construction has been pleasing, and thesecond half of 2018 will bring a significant amount of Grade A office supplyonto the market.
According to the article, another areagenerating solid demand is the residential sector, and this segment of themarket stands to inject further momentum in the economy - to illustrate, thelargest initial public offering (IPO) this year was that of a luxuryresidential developer in which Singapore's sovereign wealth fund GIC recentlyacquired a stake.
Investors from Singapore, Hong Kong and Taiwan ofChina have shown much enthusiasm in the serviced apartment and condominiummarkets, together representing 75 percent of total buyers in the buy-to-letmarket.
As a whole, foreign buyers accounted for 50percent of all successful residential deals, meaning they are not only enteringVietnam to set up operations, but are also committed to keeping their moneyhere. This could explain the 15 percent rise in prime residential prices in HoChi Minh City over the past two years.
Thanks to governmental efforts to easerestrictions on foreign holding of public companies, the future just got brighter.This allows the composition of the economic landscape to diversify andencourages foreign ownership of commercial assets.
The article also highlighted a differentiatingfactor that Vietnam boasts is the relatively equal dispersion of wealth ascompared to other developing nations. Meanwhile, the Government has laid stresson the need to improve productivity and lower transaction and logistics costs,which mean foreigners are receiving favourable conditions to land investment inthe country.
Furthermore, escalating trade tensions between the US and China have promptedcompanies to shift production to Southeast Asia in a bid to circumvent levies.
Vietnam, which is a major exporter of appareland electronics, has benefited from this shift of low-cost manufacturing awayfrom China. In addition, as the 2015 real estate market recovery shows, theoccasional market correction is good news in the long run.
The largest transactions this year - for majoroffice, residential and retail sites, are all backed by foreign capital, gaugingthe fervor that foreign investors have in Asia's rising star.-VNA
VNA
