Apr 10, 2012
More development land and investment property will change hands in 2012 than has done in the past five years.
By James Chen
The Vietnamese property market continues to grow with the large numbers of properties in various stages of construction.
Vietnam’s GDP increased 5.89 per cent y-o-y in 2011. Total FDI reached US$14.7 billion, but FDI into the real estate sector dropped from 34.3 per cent in 2010 to just 5.8 per cent in 2011, reaching the lowest level in recent years. Trade deficit is equivalent to 9.9 per cent of export turnover and 2012 is forecasted to be a challenging year in terms of economic performance, based on the global uncertainly both in the United States and Europe. “Vietnam is currently facing short term economic challenges with pressures from inflation, currency devaluation and trade deficit,” said Yip Hoong Mun, Deputy CEO of CapitaLand (Vietnam). We are confident that the fundamentals in Vietnam remain strong and the real estate market will improve given the country’s strong GDP growth coupled with rapid urbanisation and a substantially large group of young and aspiring middle-income earners.”
Residential opportunities
According to the Hanoi Quarterly Report Q4/2011, the residential property market in Vietnam’s administrative capital is expected to offer some 22,000 units for sale from 60 projects. Trading vol- umes have dropped considerably, however, dampening projects’ sales rates, with fewer speculators willing or able to participate in the market, as many have their capital stuck in existing portfolios, thus limiting their financial capacity. The current market continues to trend towards mid- and low-level products, although there are also some new luxury projects. Similar trends exist in the landed house market, as projects dominated by speculators are under pressure for further price correction. In fact, CBRE Vietnam said in January that affordable residential properties are holding their value better than any other segment in light of the challenging economic conditions.
This is a stark contrast to luxury prices, which dropped six per cent in the secondary market. Residential opportunities currently available on the market include a number of distressed assets surfacing in Ho Chi Minh City, where several projects have been delayed with some developers looking for partners. This trend surfaced in the fourth quarter of 2011 with discounts offered by developers for projects such as the Petro Vietnam Landmark in District 2, Gold House in Nha Be District and New Saigon (HAGL 3), also in Nha Be District. “We will continue to explore opportunities and grow our business in the serviced residence sector and also the residential sector,” said Yip Hoong Mun, “particularly in the mass market residential segment. Our new business unit, CapitaValue Homes, will focus on building homes that are value for money and cater to the essential needs and affordability of mass market homebuyers.”
High-end Hospitality
In 2012, a number of internationally operated hotel chains have thusfar enjoyed faster growth than their lesser star siblings in Vietnam. In terms of destinations, coastal markets such as Phu Quoc, Nha Trang and Da Nang showed a higher RevPAR growth rate than HCMC. Phu Quoc continues to lead the coastal market with with a 20 per cent y-o-y increase in RevPAR, and is expected to be an attractive destination for property investors in 2012. The launch of the new Da Nang International Airport terminal in December 2011 has led to more direct international flights to Da Nang from locations such as Seoul and Kuala Lumpur. The province enjoyed a 34 per cent visitor increase in 2011, with inter- national visitors increasing by 44 per cent. International brands such as the Hyatt Regency came online in Q4’11 with 200 five-star rooms, and InterContinental, Le Meridien, Melia and Pullman are also expect- ing to enter Danang in 2012. The Danang hospitality market is also beginning to target Russian tourists with direct Russia – Da Nang flights under consideration. “The tourism and hospitality industry in Vietnam continues to develop, even in challenging global economic times,” said Craig Douglas, director, hospitality group of Vinacapital.
“Direct flights obviously mean much easier access for international travelers in the Asian region. Silk Air already flies direct from Singapore to Danang several times a week and more recently direct scheduled flights from other carriers linking Kuala Lumpur, Malaysia and Seoul.
Investment Prospects
According to Marc Townsend, managing director of CBRE Viet- nam, various Vietnamese markets present opportunities for domestic and foreign retail and corporate investors. “Due to pressure from banks, more development land and investment property will change hands in 2012 than has done in the past five years,” he said. “Previously the investment market was characterized by Vietnamese land- owners who have had what foreign investors may perceive to be too high valuations. With distressed assets now available, prices are lowering to levels that are attractive to foreigners and bargain hunters looking for a good deal.
