VIETNAMESE PROPERTY REMAINS SAFE HAVEN FOR FOREIGN INVESTORS: SAVILLS VIETNAM

Foreign investors are still interested in the Vietnamese property market, which will remain a safe haven for them in the short term, according to Troy Griffiths, Deputy Managing Director at Savills Vietnam.

“(Vietnam’s) strong macro economy has supported positive domestic growth, and foreign direct investment continues strongly. It has been a very healthy start to 2018, with solid performance across all asset classes,” Griffiths said in a  report  titled “Savills Vietnam: Real estate market insight in 1H2018” released on July 3.

True demand from foreign investors

The historical quantitative easing (QE) environment has meant that returns across the region have been very low. As QE eases, emerging markets may come under pressure, particularly currencies.

Merger and acquisition activity across the region has been hectic. The listed market has been particularly active, with over US$1 billion in initial public offerings in the first quarter of this year, according to Savills Vietnam.

The Hochiminh Stock Exchange index has recently taken a breather, but there is still a strong pipeline of property listings to come in the near term. Historically, there have been very few listed property stocks, the report continued.

Although they bring much needed liquidity for investors, there has been a massive distrust in valuations. Good governance, progressive accounting standards and a maturing stock market will find broad appeal for foreign investors in listed property stocks, it added.

Overall, Vietnamese property returns are generally higher than its regional peers. Rental yields across most asset classes are reasonable, and with capital gain factored in, total returns are competitively high. With “country risk” rapidly diminishing, foreign capital is being lured to the Southeast Asian nation, the report pointed out.

“Vietnam is well positioned to leapfrog traditional markets through financial technology platforms that could have great benefit to property markets,” Griffiths noted.

Without legacy systems and with a young, savvy and ambitious startup culture, opportunities to embrace technological advancement are strong. The government has a raft of initiatives, decrees and circulars to support this; however, the competition from regional peers is immense, he continued.

“It will be interesting to see the region’s reaction to the QE easing and Fed interest rate rises, off the back of the improvement in the American economy. This has the potential to push capital into property.”

Of greater local interest is the strength of the Vietnamese domestic economy continuing to support demand for residential products in particular, which in turn fuels much of the broader economy.

Good governance seems set to further promote better and more effective business and foreign trade that will assist the commercial sectors. In the greatest age of domestic travel, hospitality projects are expected to continue to do well.

Domination of residential market in HCMC

Between 2013 and 2017, the apartment market in HCMC saw an average increase in apartment prices of some 9% per year, according to Savills Vietnam.

High urbanization rates and infrastructure development in the city strongly contributed to the overall improvement. Government policies have also led to a steady supply of apartments and a relatively stable market without any significant oversupply.

The strong residential demand will likely continue in the remainder of this year, particularly at the more affordable end of the market from genuine owner occupier demand. Strong new supply will come online across all grades and will capture the demand of all purchaser pools, Savills Vietnam predicted.

Apartment prices in HCMC are generally still lower than regional peers such as Kuala Lumpur and Bangkok, despite much stronger growth rates in HCMC when compared with these markets.

In 2017, HCMC high-end apartment prices were around 90% of those in Kuala Lumpur and roughly 20% of Singapore.

Savills Vietnam forecast that the average price across the broader market is expected to continue to increase but at a slower pace, with price increases linked to better development standards and continued strong residential demand driven by urbanization, the rapid growth of the middle class and new infrastructure.

Source: The Saigon Times