It may be less familiar to the international property investment community than some of its Asian neighbours, but Vietnam is one to watch in the coming years. The country performs counter cyclically to the region and is benefiting from recent firm monetary policy and multiple legal reforms.
Vietnam is outperforming its peers across many metrics: GDP growth is forecast to be solid for the near term, foreign direct investment is good and domestic consumption strong.
The country’s growing confidence is reflected in the strength of its retail sector: year-on-year retail sales grew 9.1 per cent by September 2015, one of the highest rates globally, driven by high employment and a young, increasingly prosperous population – approximately 55 per cent of whom are aged under 30.
Although average disposable income is lower than in many other economies, the urban middle class is increasingly turning to shopping for leisure. Retail development has been feverish as foreign and local developers race to compete for the good returns. As a result, there has been considerable M&A activity in the sector, with foreign developers are rolling out their formats to compete with established Vietnamese brands. Thai supermarket giants have entered the fray, as have South Korean and Japanese grocers.
2016 will see more contemporary retail space added and new formats trialed to establish what works in this rapidly changing environment. For investors who are comfortable with, and able to adapt to, the evolving situation, Vietnamese retail property offers the potential for solid long-term returns.