Vietnam has been tipped as one of the world’s next real estate investment hotspots.
Real estate firm Savills, in its Around the World in Dollars and Cents research report, highlighted Vietnam and noted how improving economic conditions have led to a rise in the fortunes of Vietnam’s property industry, with urbanisation, tourism and retail development leading the way.
According to the report, the property industry in Vietnam enjoyed a good 2015. Following on from the government’s monetary policy of 2013-2014, Vietnam’s macroeconomic conditions are now the best they’ve been for some time.
Almost all asset classes have rebounded, most notably the residential sector, Savills reported. Legal reforms, meanwhile, continue to transform industry practices.
It said Vietnam performs counter-cyclically to the region, and during 2015 it outperformed its regional peers. This trend is set to continue in 2016, Savills predicted, although some headwinds persist.
VIETNAM LANDED RESIDENTIAL DEVELOPMENT – LONG-TERM CAPITAL GROWTH
Rapid urbanisation, a fall in household occupancy and a young population will continue to underwrite residential property demand in Vietnam through 2016 and beyond.
In the short term, economic fluctuations represent the main risk, but the growing middle-class demand for new homes will be a long-term phenomenon, as long as the economy continues to perform.
Savills noted how amended housing laws now allow for foreign investment in this sector.
The landed residential markets in Ho Chi Minh City and Hanoi enjoyed strong supply and good absorption in 2015. Products are now 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.
OPPORTUNISTIC TIP: VIETNAMESE RESORTS – LONG-TERM TOTAL RETURNS
More than half of the world’s tourists come from China and Russia, and Vietnam’s long coastline and good weather are in close proximity to both countries.
Hospitality development throughout the country kicked off with fervour in 2015 and will deliver world-class product, supported by great coastal locations, quality golf courses and international architecture in outstanding destinations during 2016 – from Halong and Danang 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.
Savills said that throughout 2016 there will be a range of coastal homes available all over Vietnam from affordable levels to global prestige quality.
CORE-PLUS TIP: VIETNAM RETAIL – LONG-TERM TOTAL RETURNS
Retail development has been feverish as foreign and local developers compete in the rapidly changing environment. Year-on-year growth in retail sales stood at 9.1 percent in September 2015, one of the highest rates globally. According to Savills there’s little wonder that there has been so much M&A activity in retail.
Alongside the strong Vietnamese retailers, many foreign developers are now rolling out their formats. In 2016 there will be more contemporary space added, with new retail formats to be tested such as the Takashimaya/Saigon Centre in Ho Chi Minh City.