Following the foundation laid by the Government’s monetary policy of 2013-2014, Vietnam’s macroeconomic conditions have vastly improved according to a statement published by real estate agency Savills.
Almost all asset classes have rebounded, most notably the residential sector. Legal reforms, meanwhile, continue to transform industry practices. Vietnam performs counter-cyclically to the region and in 2015, a period of relative stagnation, it outperformed its regional peers.
In the recently announced Around the World in Dollars and Cents report produced by Savills World Research, analysis showed this trend is set to continue in 2016 although some headwinds persist.
Below are some snapshots in each of the main sectors:
Residential development – long-term capital growth
Rapid urbanisation, a fall in household occupancy and a younger population will continue to underwrite residential property demand in Vietnam through 2016. In the short-term, economic fluctuations represent the main risk but the growing middle-class demand for new homes represents a long-term trend. The Amended Housing Law now allows foreign investment in this sector, supporting future growth previously maintained by domestic demand. The landed residential markets in HCMC and Ha Noi enjoyed strong supply and good absorption in 2015. Products are diversified and oriented towards consumers, with developers vying for market share and producing villas and townhouses with ‘cradle-to-grave’ facilities, including healthcare and tertiary services for the aged. This asset class also benefits greatly from improvements in infrastructure and new links, drawing the ‘mortgage belt’ closer to the city.
Resorts – long-term total returns
Approximately half of the world’s tourists come from China and Russia, and Vietnam’s long coastline and tropical weather are in close proximity to both. Hospitality development throughout the country kicked off with fervour in 2015 and will deliver world-class product, supported by great coastal locations with quality golf courses and international architecture in 2016 – from Ha Long and Da Nang in the north to Nha Trang and Phu Quoc in the south. More than two-thirds of the country’s tourists are domestic Vietnamese travellers. The second generation of hospitality development will leverage initial success by developing second homes and resort accommodation. Throughout 2016 there will be a range of coastal homes available all over Vietnam, from affordable levels to global prestige quality.
Retail – new formats
Retail development has been feverish as foreign and local developers compete in this rapidly changing environment. In 2015, the year-on-year growth in retail sales stood at 9.5 percent, which was one of the highest rates globally. There has been significant retail related M&A activity throughout 2015. In 2016 there will be more contemporary space added, with new retail formats to be tested such as the Takashimaya Department Store within Saigon Centre in HCMC.
Office – high rental growth
Demand in HCMC is picking up significantly, giving way to a shortage of supply over the next few years. The office market is expected to see strong rental growth: good for developers but not for tenants. Tenants are recommended to move sooner rather than later as rates are expected to increase. The market in Ha Noi has some signs of improvement but it is often behind HCMC in the property market cycle.
Neil MacGregor, Managing Director of Savills Vietnam, said: “Improving economic conditions have led to a rise in the fortunes of Vietnam’s property market, with urbanisation, tourism and retail development leading the way.
“Savills is optimistic about the property market outlook, as we can see the momentum carried into 2016.
“Residential developers are now more focused on design, landscape, facilities as well as management services – higher quality projects bring more confidence to buyers.
“Vietnam is an attractive destination in the region; while other countries such as Indonesia and the Philippines are at the top of the market cycle, Vietnam is only around 12 months into the market recovery phase.
“Foreign developers and investors are showing greater interest in the Vietnam real estate market and we see this trend continuing throughout this year and beyond.”