Could there be a shift from investors to owner occupiers in the future?
2017 has been a good year for Vietnam’s residential market. There has been an increased supply of new units but also a rise in transaction numbers too. With sales of Grade C tier properties dominating in Ho Chi Minh City and grade B dominating in Hanoi. One trend that Savills has noted is the increase in first time buyers, and thus owner occupiers, to the market. Suggesting the value that people see in owning their own property and the changing way people live.
According to Savills three new units per 1,000 people are sold every year in Hanoi and Ho Chi Minh City. This has led to Vietnam having the ‘highest ratio of buyers in the region’. With some impressive yields being obtained it is not surprising that many are reaping the rewards of these two markets.
Rental yields for Hanoi are a very healthy 7.5 percent. Ho Chi Minh City’s at 5.8 percent. This is well ahead of neighbouring capitals such as Bangkok, Jakarta, Manila or Kuala Lumpur. Making buy-to-let properties a sound investment edging ahead of traditional alternative investments such as gold. Thus investors make up a vast chunk of transactions. This is heightened by the fact that many would prefer to park their capital in property rather than leave it in the bank.
Looking ahead
Over the coming year it is predicted that double the amount of units will be handed over if compared to 2016. But due to this increase in supply, there will be more competition in the market too. This could lead to cheaper rents and thus lower rental yields. Potentially shifting investor attention to different asset classes.
Despite this thirst for property as an investment asset there has been a rise in owner-occupiers. Looking ahead this could drive the property market in a different direction. Much of the upper end of the market is driven by foreign investors and the wealthy domestic market. But developers are having to alter their approach. They need to build affordable units to meet the demands of the mass market. And something that they can easily capitalise on as in Ho Chi Minh City there has been a 123 percent increase in Grade C transactions for the second half of this year. This figure is 30 percent in Hanoi.
The likelihood of softening rents will not deter owner occupiers. This could continue the drive for more people purchasing property for their own use providing that the lending rates remain manageable and housing prices are within reach.
If you are looking for a property to buy in Vietnam whether you are an owner occupier or investor, take a look at Dot Property’s listings found online here.
