Vietnam's luxury property market is presenting good potential for growth in the mid- to long-term, but the immediate outlook remains challenging, with relatively high finance costs and more supply than demand.
According to Craig Wallace, manager of valuation, consulting and research for Vietnam at DTZ, interest rates are high and credit restricted, so many would-be buyers are taking a wait-and-see approach. Demand has been limited and developers have been forced to offer more incentives to entice buyers.
High-end apartment developments in Ho Chi Minh City generally range from US$1,700 to US$2,500 per square metre, depending on quality and location. Prices in the prime central business district can reach US$4,700 per square metre. Examples include The Lancaster, Avalon, The Sailing Tower and Saigon Luxury Apartments.
Historically, Vietnam has not seen many Hong Kong developers enter the market, but the Chiaphua Group, Sun Wah Group and Luks Land have been successful investors.
Vietnam is top of Citigroup's 11 nations with the highest growth potential in the 21st century and one of the Association of Foreign Investors' top five emerging markets for this year. Its major cities are growing quickly in population and gross domestic product per capita.
'This would point towards an increasing requirement for residential accommodation within major cities. With demand at a low level due to high finance rates and credit restrictions, supply is outstripping demand. Many foreign investors are also reluctant to invest in Vietnam due to red tape,' Wallace says.
Ross Lightfoot, national director of residential sales and marketing at Knight Frank Vietnam, says legal restrictions on foreign home ownership means there has not been significant interest from overseas investors in luxury properties in big cities. The second-home and timeshare markets in coastal cities, such as Da Nang, Nha Trang, Phan Thiet, Binh Thuan and Vung Tau, have been more attractive.
'Hong Kong investors are low in numbers in the Vietnam market. Yet, it is an appealing market for them due to location, common culture and social behaviour. Vietnam's market is on its way to being mature, so there are plenty of investment opportunities. The economy is growing and with that comes increasing buying power and demand for property,' Lightfoot says.
Brett Ashton, managing director of Savills Vietnam, says Da Nang is attracting overseas buyers with its magnificent beaches, world-class golf and regular direct flights from Hong Kong.
'In VinaCapital's Danang Beach Resort and Indochina Land's Hyatt Regency Danang Residences, prices of condos and villas start from US$1,400 per square metre. Values have gone up by 20 to 30 per cent over the past 12 months,' Ashton says.
Danang Beach Resort includes The Ocean Villas, The Dunes Villas and The Cham Condominiums.
Prices for a two-bedroom apartment start as low as US$140,000 at The Cham Condominiums, with villas starting at US$460,000 at The Dunes Villas.