Vietnam has been identified as one of the next potential real estate hotspots by real estate firm Savills in its latest Around the World in Dollars and Cents research report, published this week.
The report explores what and where the future playgrounds might be for a wide variety of investors.
Over the next five years Savills said the world is likely to see further recovery in markets that were hit by the economic downturn. Stable prices but lower transactional activity seem to be on the cards for core prime cities that have been fully invested in recent years. Meanwhile, small cities that are succeeding in the tech economy, as well as those where strong economic growth is expected nationally or locally, are likely to see increased transaction levels.
Any anti-foreign investor regulation and legislation will reduce cross-border activity, the firm noted, as will high levels of corruption and lack of transparency in some places.
Geopolitical factors will also dampen appetite in certain regions.
Focusing on Vietnam, Savills noted the property industry enjoyed a good 2015. Following on from the Government’s monetary policy of 2013-2014, Vietnam’s macroeconomic conditions are now the best they’ve been for some time.
Almost all asset classes have rebounded, most notably the residential sector. Legal reforms, meanwhile, continue to transform industry practices.
Vietnam performs counter-cyclically to the region, and in 2015 it outperformed its regional peers. This trend is set to continue during 2016, it said, although some headwinds persist.
VALUE-ADD TIP – VIETNAM LANDED RESIDENTIAL DEVELOPMENT – LONG-TERM CAPITAL GROWTH
Rapid urbanisation, a fall in household occupancy and a young population will continue to underwrite residential property demand in Vietnam through 2016 and beyond, Savills reported. In the short term, economic fluctuations represent the main risk, but the growing middle-class demand for new homes will be a long-term phenomenon, as long as the economy continues to perform.
Amended housing laws now allow for foreign investment in this sector.
The landed residential markets in Ho Chi Minh City and Hanoi enjoyed strong supply and good absorption in 2015. Products are now diversified and oriented towards consumers, with developers vying for market share and producing villas and townhouses with ‘cradle-to-grave’ facilities, including healthcare and tertiary services for the aged. This asset class also benefits greatly from improvements in infrastructure and new links, drawing the ‘mortgage belt’ closer to the city.
OPPORTUNISTIC TIP – VIETNAMESE RESORTS – LONG-TERM TOTAL RETURNS
More than half of the world’s tourists come from China and Russia, and Vietnam’s long coastline and good weather are in close proximity to both countries.
Hospitality development throughout the country kicked off with fervour in 2015 and will deliver world-class product, supported by great coastal locations. Improving economic conditions have led to a rise in the fortunes of Vietnam’s property industry, with urbanisation, tourism and retail development leading the way
More than two-thirds of the country’s tourists are domestic Vietnamese travellers. The second generation of hospitality development will leverage initial success by developing second homes and resort accommodation.
Throughout 2016 there will be a range of coastal homes available all over Vietnam from affordable levels to global prestige quality.
CORE-PLUS TIP – VIETNAM RETAIL – LONG-TERM TOTAL RETURNS
Retail development has been feverish as foreign and local developers compete in this rapidly changing environment. Year-on-year growth in retail sales stood at 9.1 percent in September 2015, one of the highest rates globally. Little wonder that there has been so much M&A activity in retail.
Alongside the strong Vietnamese retailers, many foreign developers are now rolling out their formats. In 2016 there will be more contemporary space added, with new retail formats to be tested such as the Takashimaya/Saigon Centre in Ho Chi Minh City.