The property market will develop strongly in all segments this year, building on last year’s robust recovery, experts tell Việt Nam News.
Stephen Wyatt, Country Head, Vietnam, JLL
The Vietnamese market will witness another strong year in 2017. The economy is performing well and is considered one of the best performers in Southeast Asia. We expect to see considerable activity in all sectors of the market with positive focus on low-mid end residential in cities, as well as the office hospitality and industrial segments in HCM City. Based on the considerable number of enquiries we are receiving from both foreign and domestic investors, we expect a record year for M&A activity.
Since the change in foreign ownership legislation in July 2015, we have witnessed a considerable increase in foreigners buying property in Việt Nam. During the 5-year pilot programme, prior to 2015, approximately 200 residential units were bought by foreigners. Since the change of legislation, we understand over 1000 units have been transacted. This demonstrates that there is genuine interest from foreigners to invest in Việt Nam and we expect that will continue on the same trajectory in 2017.
Whilst we have seen an increase in sales volumes over the past 18 months, challenges still remain. At present, foreign buyers do not have the ability to mortgage their property; therefore, all transactions have been cash purchases. This generally limits the average transaction price to approximately US$250,000-300,000. If legislation changes and banks obtain the relevant licensing to start lending to foreigners, we expect sales volumes to increase significantly. Other challenges come from lack of transparency, understanding of legal framework, the need to visit Viet Nam to get a valid visa, opening a bank account in Việt Nam and concerns about taking money out of the country. Most of these concerns can now be easily addressed if the purchasers go through the correct procedures and channels.
Regarding credit for the property market, credit growth in 2016 increased approximately 18.6 per cent y-o-y, and a similar target rate has been set for 2017. If the SBV starts to implement cooling measures, we expect this will be an opportunity for foreign investors to step in. We are currently seeing considerable interest from foreign investors in all sectors of the real estate market and if local developers find it difficult to finance their projects domestically, there are plenty of options to form Joint Ventures with foreign groups that can bring a wealth of track record, experience and capital. Other forms of raising capital can come in the form of convertible bonds and a potential IPO for some of the larger groups.
Đỗ Thu Hằng
Đỗ Thu Hằng, Associate Director of Research, Savills Việt Nam’s Hà Nội branch
Sale of apartments will continue to be hot this year. Savills Việt Nam expects volume of apartments offered in 2017 to reach 40,000-50,000 units, higher than 30,000 units in 2016.
Last year, the volume of sold apartments reached 24,000 units.
However, Savills Việt Nam saw the volume of sold low-grade apartments, including cheap-price units, to be lower than the volume of mid-grade apartments. Therefore, many large investors this year will investment in low-grade apartments, along with high and mid-grade apartments. For instance, VinCity, Hải Phát, Econhouse and some other investors located in other provinces and cities will have plans to develop housing projects, including cheap-price commercial apartments in Hà Nội, which still has high demand on those products.
Investment in cheap-price apartments is a reasonable option, because the people’s income has increased and their demand for apartments will continue the growth. Meanwhile, the market has had a large supply of high and mid-grade apartments.
This year, investors can take advantage of technological advances and efficient management of production so they can profit from investment in urban projects. They will develop in urban areas having good infrastructure and many convenient services to compete with other property segments.
The hotel market will also be on the rise this year. Investors in this market have gradually completed building infrastructure and new projects. Many famous brands in the world will enter the Hà Nội market, like Four Seasons and Park Hyatt.
“Shophouse” will continue being a hot issue this year after attracting much attention in 2016, because such projects earned higher profits than other segments.
Savills Việt Nam expects that the real estate market in Hà Nội will not suffer major impacts from the State’s tightened credit policies.
Nguyễn Hoài An
Nguyễn Hoài An, Manager, Professional Services, CBRE Việt Nam
The domestic real estate market this year will be affected by national, regional and global economic developments, including lending rates. The interest rate in Việt Nam has stood at a reasonable level, but it is expected to increase this year due because of global economic impacts.
The hottest issue will be development of the housing segment due to the high demand for these products. Việt Nam’s property market has been developing for many years, but it is still young market compared to others in the region.
Many people live in houses built by themselves, not professional property developers, so the demand for professionally designed and built living apartments or houses will be high.
In addition, increasing incomes will enable more people to buy houses.
This year, supply will rise in the housing market as demand rises, and the market will undergo structural changes in terms of different segments. For the last several years, supply has focused on the high-end segment in Hà Nội and HCM City, in anticipation of market recovery, targeting foreign buyers. However, there is largest demand is in mid- and low-grade segments, so CBRE Việt Nam expects investment to move to these two segments this year.
For commercial property like office and retail spaces, there will be growth in supply and demand for these products, as well as a boost in mergers and acquisitions in Hà Nội and HCM City, especially the latter.
HCM City has seen an increase in demand for office space, but supply has been slower, so rentals are expected to increase faster this year.
Another key factor is tourism property. Tourist arrivals increased sharply by 25-26 per cent in 2016 therefore demand for tourism properties like condotels and villas is expected to be higher.
Regarding capital market for property, the state has adjusted credit policies for the domestic property market after two years of fast development, strictly controlling capital flow from banks to the property market.
Some property developers have looked beyond banks to find their projects. They have mobilized capital by issuing international bonds or shares to foreign investors. For instance, Kim Sơn Land has sold shares to Japan investors.
However, in the short term, mobilisation of capital from banks is still the major channel, and for middle and long term projects, more Vietnamese investors will choose other channels.