Vietnam

20 January 2016, by Troy Griffiths

Improving economic conditions have let to a rise in the fortunes of Vietnam’s property industry, with urbanisation, tourism and retail development leading the way.

 
 

2015 was a good year for the Vietnam property industry. Following the government’s monetary policy during 2013/14, Vietnam’s macro-economic conditions are now at their best for some time. Almost all asset classes have now rebounded, most notably the residential sector. Legal reforms, meanwhile, continue to transform industry practices. Vietnam performs contra cyclically to the region, and in 2015 it outperformed its South East Asian peers. This is a trend set to continue in 2016, although some headwinds persist.

Value add tip: Vietnam Residential – Long term

Rapid urbanisation, decreasing household occupancy and a young population will continue to underwrite residential property demand in Vietnam through 2016 and beyond. In the short-term, economic fluctuations are the main risk but growing middle class demand for new homes will be a long-term phenomenon leading to capital growth provided the economy continues to perform. Amended Housing Laws now allow for foreign investment activity in this sector.

The landed residential markets in Ho Chi Min City and Hanoi enjoyed strong supply and good absorption in 2015. Products are now diversified and orientated towards consumers with developers vying for market share and producing villas and townhouses on estates with excellent facilities that provide ‘cradle to grave’ product, including health care and tertiary facilities for the aged. This asset class also benefits greatly from improvements in infrastructure and new linkages which draw the ‘mortgage belt’ closer to the city.

Opportunistic tip: Vietnamese Resorts – Long term

China and Russia represent over 50% of the world’s tourists and Vietnam’s long coastline and good weather is in close proximity. Hospitality development throughout the country kicked off with fervor in 2015 and will deliver world class product supported by great coastal locations, quality golf courses and international architecture in outstanding destinations in 2016. From Halong and Danang in the north through to Nha Trang and Phu Quoc in the south.

Over two thirds of all tourists are domestic Vietnamese travelers. The second generation of hospitality development will leverage initial success by developing second homes and resort accommodation. Through 2016 there will be a range of coastal homes offered throughout Vietnam, from affordable levels to global prestige quality. All these should produce good total returns.

Core plus tip: Vietnam Retail – Long term

Retail development has been feverish as foreign and local developers compete in this rapidly changing environment with good total return prospects. YoY growth in retail sales stood at 9.1% 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. 2016 will see more contemporary space added with new retail formats to be tested such as Takashimaya / Saigon Centre in HCMC.

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Key Contacts

Troy Griffiths

Troy Griffiths

Deputy Managing Director

Savills HCMC

+84 933 276 663

 

Yolande Barnes

Yolande Barnes

Director
World Research

Savills Margaret Street

+44 (0) 20 7409 8899

 

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