Diversification means a new high for real estate

The real estate market in Vietnam has witnessed a burst of activity, with increasing interest from both foreign and local investors – as Vietnam’s economy is a highlight in Southeast Asia and the country’s property market continues to show resilience, with consistent growth across varying segments.

Some real estate companies, especially local firms, are shifting their focus to low- to mid-end residential developments to attract more buyers, targeting the young workforce which accounts for a large portion of the country’s population. Other developers are moving towards the true luxury end of the market, where to date there has been very little in the way of supply.

Vietnam is attracting considerable interest from foreign investors as a result of its booming economy. With regards to the real estate market, its counter cyclical nature may give it an edge over regional competitors. While countries like Indonesia and the Philippines may be witnessing signs of a real estate downturn, Vietnam is in the midst of a recovery period.

Savills Vietnam has witnessed continued improvements in the quality of foreign direct investment (FDI) flowing into Vietnam, and this is particularly apparent in the real estate sector. Gone are the days of massive, speculative real estate projects that never materialise. In their place are a growing number of well planned, sustainable real estate projects, utilising the best architects and consultants from around the region.

Real estate is also set to benefit from the significant FDI flows into manufacturing, leading to a greater demand for housing, retail and office space, and of course industrial zones.

Given the significant levels of enquiries that Savills is receiving from overseas investors, strong FDI flows are expected to continue into real estate and the broader economy in general.

In the coming time, there is no doubt that the hospitality sector is entering a boom period, with strong demand for both city centre hotels as well as resorts. This is supported by rapid growth in the number of foreign visitor arrivals (increasing 26 per cent on-year in 2016) as well as a higher number of domestic travelers. We are also witnessing strong demand for quality office buildings, with record occupancy rates of around 97 per cent in Ho Chi Minh City at this time.

Vietnam’s real estate market has come a long way in the last 10 years and is reaching an exciting period of maturity. Residential buyers have become as sophisticated as anywhere else, and will increasingly settle for only the very best projects that can offer long term, stable investment returns. While factors such as infrastructure development are important to the success of a project, it is also important to look beyond the marketing hype and consider whether or not a developer is investing for the long term.

Savills believes that demand is currently outpacing the supply of affordable housing in major cities, and this trend is set to continue. Strong growth is expected in both demand and supply of landed housing, including villas, townhouses, and shophouses.

The resort sector is set to take centre stage in 2017, with a 26 per cent growth in foreign visitors to Vietnam in 2016 and the rapid growth in spending by domestic tourists over the last few years.

There is also a lot of excitement surrounding APEC in Danang and the attention that this will place on the central region of Vietnam. Meanwhile, the large volume of new resorts in both Cam Ranh and Phu Quoc will bring many new exciting choices to the market for holiday travelers.