Readying for the new real estate upturn

I arrived in Vietnam in April 2001 after making the decision to leave the UK. This followed a spectacular holiday to Vietnam in November 2000, where I was visiting a good friend in Hanoi. On that trip I met the then general director of Chesterton Petty Vietnam in Sapa and we discussed our mutual work experience in London and our passion for travel. I was fortunate that Chesterton Petty Vietnam had a role available in Ho Chi Minh City and that my work experience in London matched their needs.

Although a few people in the UK were rather surprised at my decision, it was a natural career progression for me after working in London for around five years in the international investment team for another global property advisory company. The job in Ho Chi Minh City represented a new challenge in an exciting real estate market full of promise and opportunity.

Not long after my arrival in Vietnam in 2001, I was fortunate to meet my wife and was quickly introduced to her wonderful family. We married in December 2003 and now have three children who are very proud of their Vietnamese and Scottish background. They are fluent in both Vietnamese and English, often stepping in as my translators when my Vietnamese language ability fails to deliver. We are lucky to live in Phu My Hung and could not be happier as a family.

The local market is to see further momentum when the amended Housing Law takes effect in July
Photo: Le Toan

Vietnam has been a fascinating place to work over the last 10 to 15 years, with constant change, fast-paced growth and new challenges around every corner. I am fascinated by working in the real estate industry in Vietnam.

Due to the global economic crisis in 2008, Vietnam encountered bad debts, high inflation and rising interest rates, which negatively affected the property industry. The country has gone through a very tough economic downturn especially in the last three years, of course negatively affected the property industry. The market has been slow and prices have generally been depressed.

However, starting from late last year, we have observed a market turnaround and now expect to enter a new period of solid growth. It’s a very exciting period for anybody involved in the real estate market. That extends across sectors, but an improved residential market is causing particular excitement. We’ve seen dramatically higher absorption rates in both Ho Chi Minh City and Hanoi. We are also very optimistic about the retail market over the medium to long term, due to the rapidly growing middle class in Vietnam.

Office leasing in both Ho Chi Minh City and Hanoi is expected to do well in 2015 and the hospitality market will continue to be driven by growing numbers of Vietnamese travellers as well as foreign tourists. We are also seeing growing interest from investors in operating assets, driven by institutional investors looking for a strong cash flow and rental yields. Such properties include office buildings, hotels, serviced apartments, and shopping centres. We’re seeing demand from both local and foreign investors.

The most remarkable changes have also been seen in second tier cities such as Danang, Nha Trang, Haiphong, Can Tho – in the Mekong Delta, and Phu Quoc.

The holiday-home market has been developed in Danang, and now in Nha Trang. Markets such as Can Tho and Haiphong are very wealthy economies themselves and very interesting from a residential perspective, particularly in the affordable home segment where there are a lot of opportunities. Many developers – local and foreign – are starting to look closely at Phu Quoc as a number of significant projects move forward on the island, and the new international airport is fully functioning there, with a number of direct foreign flights already announced.

Vietnam’s real estate market in 2015 is expected to see positive develoments as a result of several new policy initiatives. The innovations in the Law on Real Estate Business will help to accelerate the restructuring of the market, creating conditions to attract investment from local people as well as FDI.

Whether FDI flows into Vietnam in general or the real estate sector in particular, it will contribute to increased purchasing power and improve the real estate business.

When the amended Housing Law takes effect from July 1 this year, we believe the residential market will see further momentum, with increasing demand from foreigners living and working in Vietnam, as well as new demand from outside the country.

The VND30 trillion ($1.4 billion) credit package, with the loan term extended to 15 years, promises to be a lever for the social housing market. Thus the market is expected to gradually recover, not only in the affordable segment but also at the premium end. Experts and budget planners expect that interest rates will be kept low in 2015, representing a good opportunity for local and foreign investors.

2015 is also a remarkable year for Savills Vietnam, as we’re celebrating 20 years of operations and growth within the Vietnam market. We are very proud of our success, the awards that we have won, and the full complement of services that we are still able to offer our clients, despite the tough market over the last few years. We strongly believe that 2015 will be a year of positive growth for Savills and the real estate industry in general.

Thank you very much. On behalf of Savills Vietnam and myself, I wish VIR and your readers a new year of joy, success, and prosperity.