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Foreign investors remain strongly interested in the Vietnamese property market. Quantitative easing (QE) has brought very low returns throughout the region. As QE eases, emerging markets may come under some pressure, particularly currencies. Property will remain a safe haven throughout the short term.
|Troy Griffiths, deputy director of Savills Vietnam|
We can see that mergers and acquisitions activity across the region has been pretty hectic. The listed market has been particularly active with over $1.0 billion collected through listings on the Vietnamese stock exchange in the first quarter of 2018.
Whilst the HOSE index has recently taken a breather, there is still a strong pipeline of property listings to come in the near term.
Historically, there have been very few listed property stocks. Whilst they bring much needed-liquidity for investors, there has been a massive distrust in valuations. Good governance, progressive accounting standards, and a maturing stock market will find broad appeal for foreign investors in listed property stocks.
Overall, Vietnamese property returns are generally higher than regional peers. Rental yields across most asset classes are reasonable and with capital gain factored in total returns are competitively high. With ‘country risk’ rapidly diminishing, foreign capital is being lured to Vietnam.
Vietnam is well positioned to leapfrog traditional markets through financial technology platforms that could have great benefit to property markets. Without legacy systems and with a young, savvy, and ambitious startup culture, the opportunities to embrace technologic advancement are strong. The government has a raft of initiatives, decrees, and circulars to support this, however competition from regional peers is immense.
It will be interesting to see the regions reaction to the QE and Fed interest rate rises off the back of the improvement in the American economy. This has the potential to push capital into property. Of greater local interest is the strength of the Vietnamese domestic economy continuing to support demand for residential products that in turn fuels much of the broader economy. Good governance seems set to continue promoting better and more effective business and foreign trade that will assist commercial sectors. In the greatest age of domestic travel, hospitality projects will continue to do well.
From 2013 to 2017, the Ho Chi Minh City apartment market saw an average increase in apartment prices of around 9 per cent per annum. High urbanisation rates and infrastructure development in Ho Chi Minh City strongly contributed to the overall improvement. Government policies have also led to a steady supply of apartments and hence a relatively stable market without any significant oversupply.
The strong residential demand will likely continue throughout the rest of 2018, particularly at the more affordable end of the market from genuine owner occupier demand. Strong new supply will come online across all grades and capture the demand of all purchaser pools. Apartment prices in Ho Chi Minh City are generally still lower than regional peers, such as Kuala Lumpur and Bangkok, despite much stronger growth rates in Ho Chi Minh City when compared with these markets.
In 2017, high-end apartment prices in Ho Chi Minh City were around 90 per cent of those in Kuala Lumpur and around 20 per cent of Singapore.
The average price across the broader market is expected to continue to increase, but at a slower pace, with price increases linked to better development standards and continued strong residential demand driven by urbanisation, the rapid growth of the middle class, as well as new infrastructure.