Real estate on top for investors

Vietnam witnessed its lowest foreign inflow in the capital market in four years with US$127 million in 2015, compared with an average of US$124 million in the 2012-2014 period. Many foreign investors are getting out of emerging markets and are using property as an alternative investment. As such, Vietnam saw a flood of investment into its real estate market last year.

“Real estate is liquid in the current market as buyer confidence is high. The macro economy currently compelling, and as such, the risk involved in selling through a project is reduced. This is encouraging foreign investors to commit to a range of residential developments throughout Vietnam across both the low-cost and high-end residential markets”, said Matthew Koziora, director of transactions at VinaCapital Real Estate.

In 2015, significant supplies of condominiums were placed on the market by experienced local and foreign developers like Masteri Thao Dien, Keppel land, CapitaLand, and Novaland to name but a few. The sector witnessed good absorption as developers offered more incentives, flexible payment terms, and more affordable prices.

“The growth is expected to continue into 2016 with a high absorption rate due to economic recovery, improving infrastructure, a more open legal framework, and numerous free trade agreements, However, there is a rising concern of oversupplying after 2016 and 2017”, said VinaCapital general director Don Lam.

Neil McGregor, managing director of Savills Vietnam, told Vir that the residential sector would see a strong demand for smaller and mid-end apartments and mid-end apartments and landed housing projects like villas in prime locations, such as near metro lines or in water-front locations.

Another favourite segment which experts have recommended to investors is office buildings. The main reason is that the demand for office space has been increasing in prime Tier A buildings evidenced by high occupancy rates, especially in Ho Chi Minh City. Small and medium-sized office buildings under 500 square meters were in especially high demand. There is growing interests from local firms, as opposed to mainly foreign firms in the past, for Tier A office space.

McGregor noted that the increased interest in Ho Chi Minh City’s office segment was driving up the rental rates as there is a shortage of good quality buildings in the city. He predicted that would be a growing demand from both investors and developers in the near future.

Meanwhile, Vietnam’s hospitality segment offers good prospects for investors. The industry has improved occupancy rates across all grades, while additional projects were launched in great coastal locations, with quality golf courses, and international-standard architecture. In 2016, the market will see more coastal homes rolled out from affordable homes to luxury mansions.

“The resort sector is expected to perform well in 2016 with increasing demand. International airports are operating more direct flights going to Danang, Cam Ranh, and Phu Quoc, which will boost tourism and encourage further resort developments in these areas”, McGregor added.