Stephen Wyatt, Country Head of JLL Vietnam, shared his thoughts on the real estate market in Vietnam and his expectations and predictions for the year ahead.
What are your general observations about Vietnam’s property market last year?
Last year saw an increase in activity in pretty much all sectors in the real estate market in Vietnam. We have seen rising sentiment and much more interest in real estate over the last year. That was driven by strong economic conditions over the last two years, with interest rates coming down significantly and inflation at around 3 percent.
Residential sales values increased substantially over the course of the year and, more importantly, in Hanoi, Ho Chi Minh City, and some smaller cities like Da Nang, we’ve seen more supply come onto the market. At the moment demand is keeping up with supply so it is a fairly positive picture.
In the office sector we have seen differences in the two cities. Ho Chi Minh is short of supply at the moment on the office side, so we will see the segment start to increase this year because many companies are looking for more space. Hanoi is behind Ho Chi Minh City in supply but we expect to see more activity in its office segment next year.
In other sectors, such as retail, I think some trading centers are okay and some are still struggling, depending on their location and the harvest.
What we do expect to see in the next two or three years is the industrial sector improving quite significantly, because a lot of foreign investors are coming to Vietnam.
Vietnam has become party to a number of free trade agreements, with the establishment of the ASEAN Economic Community (AEC). How will this affect Vietnam’s real estate market in the future?
This will have a number of benefits. All of these agreements will have a positive effect on Vietnam and I think the country will benefit a great deal. As trade between countries increase, many manufacturers arrive in Vietnam with demand for land and space at industrial parks.
That is just one part of the real estate market but we hope to see increases in employment and greater demand for residential space and office space. So these agreements will have a positive effect on the real estate market and we expect that to continue over the next three to five years.
Vietnam is considered an emerging market in the region. Is now a good time to begin investing in emerging markets’ real estate, given the uncertainty over the global economy?
Despite the global uncertainty Vietnam has performed well over the last 12 months. The stock market was up 12 percent this year, inflation is stable at 3 percent and interest rates are steady at between 8 and 9 percent. The property market has experienced a downturn for the last four or five years but in the last 12 months it has rebounded and we are witnessing an increase in positive sentiment and overall confidence.
Property prices in Vietnam remain affordable, with a typical two-bedroom, 70 sqm residential apartment within a 10 to 15-minute drive of Ho Chi Minh City’s central business district selling for US$1,600 to US$2,000 per sqm, or US$112,000 to US$140,000.
When compared to other major cities in the region we believe there is considerable upside.
What are your predictions for Vietnam’s real estate market this year?
Last year had some turning points in the real estate market. We have had a number of years of very soft market conditions. We saw many changes and a lot more activity, and we expect that to continue in 2016. I think a number of factors need to be considered, especially issues in the banking sector.
It really depends on how banks perform and continue to lend going forward. Credit has increased significantly, so developers have had more money to spend on developments.
We expect Vietnam’s real estate market to see positive signs in 2016.
Image: Created by Tomdoan and reproduced under a Wikicommons license.
