Property market inspires belief
The speed of Vietnam's property market's turnaround has been described as startling. What was, only four years ago, a sector on its knees is now the rising star of Southeast Asian real estate.
The fillip is largely due to improving fiscal conditions. Real estate company Jones Lang LaSalle reports that Vietnam's economy grew by 6.8 per cent in the third quarter of this year, climbing from 6.4 per cent in the second quarter, and 6.1 per cent in the first, supported by foreign direct investment (FDI), which jumped by 53.4 per cent, to US$17.2 billion during the January-September period this year. The real estate sector is cited as the second-highest recipient of this FDI inflow, behind only the processing and manufacturing sectors.
Confidence is also reflected in the number of newly registered enterprises nationwide, which jumped by 28.5 per cent, and the volume of property sales, which has on average doubled in the past year, enabling developers to halve their unfold inventory left over from the previous slump.
CBRE says the number of apartments sold in Hanoi in the third quarter swelled by 154 per cent compared to the same period last year, while in Ho Chi Minh City, sales grew by 88 per cent. Marc Townsend, managing director of CBRE Vietnam, credits the strong economy, and Vietnam's further integration into the world through trade agreements, as spearheading FDI inflow into the property sector.
Recent major deals, he explains, include notable investments by two Hong Kong entities: Chow Tai Fook's US$4.4 billion purchase of a controlling stake in Hoi An casino resort, and private equity firm Gaw Capital Partners' acquisition of four projects in Hanoi, Da Nang, Quang Nam and Ho Chi Minh City.
Local buyers have boosted demand in the condominium sector, but a relaxation of laws around foreign investment, effective since July 1, has proved pivotal, allowing foreigners holding valid visas, and foreign companies and organisations registered in Vietnam, to purchase unlimited numbers of apartments and villas.
Vingroup, a leading Vietnamese property developer, immediately offered its high-end condo project, Vinhomes Central Park, in Ho Chi Minh City to foreign buyers, reporting that registrations to purchase were received on 112 apartments within the first two hours.
Townsend says that the law proved to be more significant than anticipated, and marked a strong step in the opening up of the Vietnam property sector. CBRE reports strong sales figures to foreigners and overseas Vietnamese in the months since.
The skyline is rapidly transforming in a country tipped by the Asian Development Bank to be the fastest-growing Asean economy of this year, with the prospect of the Trans-Pacific Partnership providing further economic impetus. In early October, a three-party joint venture broke ground on a US$1.2 billion Empire City project in Ho Chi Minh City, comprising a shopping mall, five-star hotel, office building, condominium complex and an 86-storey multifunctional tower, which is likely to be the highest building in Vietnam. The project is to be implemented in four phases, with the first running between next year and 2018.
Two Japanese real estate groups have announced plans to construct a high-end condominium building, also in Ho Chi Minh City (construction slated for 2017), while Deutsches Haus, a premium grade-A building offering around 30,000 square metres of prime offices in the CBD - with space also reserved for retail and residential - is slated for completion in the third quarter of 2017. Deutsches Haus will house the German consulate.
In the capital, Hanoi, high-end apartment launches tripled in the second quarter of this year, CBRE reports, while in the resort sector, Savills Vietnam launched Caye Sereno, an exclusive collection of beachfront villas on the dramatic coastline of Ha Long Bay.
Designed by Brazilian architect Marcio Kogan, the project highlights the increasing sophistication of development in Vietnam and as Matthew Powell, director of Savills Hanoi, points out, reflects this emerging economy's arrival on the radar of international luxury property investors.