HCM City real estate market continues slow simmer

Vietnam as an emerging nation has strong prospects for real estate investments— however Ho Chi Minh City is particularly strong, as industrialization by large multinational companies drive up tenant rentals.

BNP Partners says it is bullish on Vietnam despite the dong’s weakness and is advising clients to acquire Vietnamese banking stocks like Vietcombank citing the expectation of relatively high profits in real estate over the long term

JLL Vietnam country head Stephen Wyatt in turn notes sales and pricing in the Ho Chi Minh City market have been picking up steadily since the market bottomed out in the fourth quarter of 2013

Wyatt points out that a typical 70 square metre two-bedroom home within a 10- to 15-minute drive to the central business district in Ho Chi Minh City is about US$1,600 to US$2,000 per square metre, which extends out to US$112,000-US$140,000 per unit.

“These prices are very affordable,” said Wyatt and when combined with more convenient consumer long-term financing by Vietnamese banks, bodes well for high rates of return for real estate investments.

"When compared with other major cities within the region, we believe there is considerable upside," Wyatt says, adding investors anticipate returns of six to seven per cent on residential property and 9 to 11 per cent on commercial real estate in the city.

Meanwhile PropertyGuru says cities like Hanoi and Ho Chi Minh City could soon become the new property hotspot in the Asia Pacific region, challenging the likes of Bangkok and Singapore for investment dollars.

A new law introduced by the government in July 2015 has made it possible for foreigners to purchase property in Vietnam.

However, the upturn in investors has yet to materialize. While local confidence in the real estate market is high, rental yields are still proving to be an issue, keeping foreign investors at bay.

For instance, residential housing yields in Hanoi are much too low at present if one factors in the elevated risk, averaging five per cent for condominiums and around three to four per cent for villas.

PropertyGuru underlines this is just one issue facing Vietnam before it can start to seriously challenge countries like Thailand for foreign real estate investment.

Additionally, there are some issues with taxes and how to cash out investments and return the money to the countries of their foreign owners that need to be worked out before Vietnam’s real estate market can truly take off.

JLL Vietnam country head Stephen Wyatt says having a proper exit strategy for any real estate investment in crucial.

The golden rule of investing overseas is to follow closely the correct procedures imposed by the local government when selling and cashing out the property— but those procedures have yet to be fully developed by the Vietnam government.