Opportunities Not Shared Equally among Market Segments

Source: Pano feed


The real estate market of Vietnam has made a recovery with an increased transaction volume, particularly in the medium – high segment. The progress of some projects with prime locations has been boosted and completed to catch the opportunity of market recovery.

Industrial parks, mid-high level apartments and resort real estate are expected to be the most profitable and stable investment segment compared to the rest of the real estate market in 2015.

More room for market recovery

From 1st July 2015, foreigners and overseas Vietnamese will be allowed to buy houses in Vietnam under the Housing Act (amended) approved by the National Assembly. This decision is expected to create a spectacular recovery for the real estate market after a long freeze.

Overseas Vietnamese community living and working abroad and achieving wealth in foreign countries desire to own real estate in their home country. Mr Nguyen Van Dung, a Vietnamese German, is glad to hear that the new law allows unrestricted purchase of apartments in Vietnam. He said that he would invest in apartments for rent and for business. According to Mr Dung, housing prices in Vietnam have fallen quite deeply and the market is recovering, which has made it possible to make a profit.

Many foreigners living in Vietnam for many years consider Vietnam their second home and desire to own their own home, rather than being allowed to rent only.

Under the new regulations, foreigners buying real estate in Vietnam will be allowed to lease, purchase, inherit or mortgage, while previous regulations only allowed them to buy a house for residential purposes. The right to lease is extremely important for foreigners. Along with the new regulations is clear and transparent guidance for foreigners to get this right for a long term and to be able to pass down their property through inheritance.

Mr Nguyen Tran Nam, Deputy Minister of Construction, said that the Housing Law (Amended) offered the most open conditions that allow foreigners to buy and own legitimate houses in Vietnam, which will help the Vietnamese market to become more attractive, erase the initial barriers and create a fairer playing field between foreigners and Vietnamese.

Opportunities for the premium segment

Real estate inventories decreased sharply. According to the Ministry of Construction, to mid January 2014, real estate inventory decreased to about VND73,889 billion, down VND20,569 billion (21.8 percent) compared with the same period of 2013. Compared to early 2013, this figure dropped VND54,659 billion (equivalent to nearly 43 percent).

General Director of Cushman & Wakefield Vietnam, Timothy Horton predicted: “2015 will be a very exciting year of real estate in Vietnam.” According to him, one of the most important changes was the policy. The amended Real Estate Law has great impact on the industrial real estate segment in particular and on the real estate sector in general. The law allowing foreigners and overseas Vietnamese to own real estate has led investors to bring their attention back to the Vietnamese market, significantly increasing confidence in the market.

Cushman & Wakefield believe that there are still a large number of people able to pay for high quality projects with convenient location and affordable price. Therefore, those apartment projects’ prospects are very bright.

The chance of recovery of the real estate market is increasingly clear, but not shared equally among all market segments. Investors now have faith in high-end projects in areas having complete infrastructure. In Hanoi, where housing prices are always the highest in the country, projects in the downtown area are ahead of the market; recovery is rapid and transaction prices have moved up significantly.

The apartments which have been handed over or will soon be completed within only the next 3-6 months with the possibility for immediate rent will be promising an attractive return rate this year.

Currently, in the market of Ho Chi Minh City, many mid-high apartment product lines able to meet the requirements of fast moving consumption have appeared. Revenues from monthly rental income accounts for average rent rate from 0.5 to 0.75 percent of the total value of the apartment, depending on location, utilities and furniture. For example, an apartment worth VND2 billion is committed to being rented with VND10-15 million per month in the first year. Compared with bank profitability rate of about 6 percent a year, investment in this real estate segment is 1.5 times higher.

General Director of CBRE Vietnam, Marc Townsend said that from the first quarter of 2015 onwards, real estate speculators will return, for the arrival of investors has been remarkable. After 7 years of crisis when real estate lack of positive news, investors have had a long wait to be reactivated. He also commented that 2015 will be the year for high-end apartments; other segments will also get better. If banks continue to assist buyers with more attractive and reasonable interest rates, the housing market will see much more positive developments in the next 2-3 years.

Bao Chau

Đăng ký: VietNam News