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.