June 2017 – Officehcm

A sharp increase in foreign arrivals to Vietnam at the start of 2017 has injected a huge development impetus into the coastal resort sector, and there have also been a raft of investments, mergers and acquisitions in other real estate sectors. Vietnam’s largest property consultancy firm Savills recently released a report on the investment and transfer of real estate projects that have taken place so far this year.

One of the stand out transactions was made by CapitaLand Group with the purchase of a 0.6-hectare (1.5-acre) piece of commercial land in downtown Ho Chi Minh City to build Vietnam’s first A-class international complex. The project will receive more disbursement from a $500-million investment fund committed by Singaporean developers last November. CapitaLand also announced the acquisition of a 90 percent stake in a 0.8-hectare project in Thao Dien, Ho Chi Minh City, to build over 300 apartments.

Another Singaporean developer Keppel Land has paid VND 846 billion ($37 million) to raise its share to 16 percent in the Saigon Center project in downtown Ho Chi Minh City.

Besides, in March, Hong Kong Land officially became a strategic partner of the Ho Chi Minh City Infrastructure Investment Joint Stock Company (CII) to build housing projects in the new Thu Thiem urban area.

In another popular residential area in the southern economic hub, local group An Gia and its Japanese partner Creed Group continued their takeover of five apartment blocks in La Casa project in District 7 worth some VND 910 billion (around $40 million).

In the resort sector, Malaysia’s Berjaya Land sold its 70 percent stake in a four-star resort on Phu Quoc Island to Sulyna Hospitality for $14.65 million.

According to Savills, Vietnam’s tourism sector enjoyed a great start to this year with around 3.2 million foreign arrivals in the first quarter, up 29 percent on-year.

This growth follows record numbers in 2016 when Vietnam welcomed over 10 million international tourists. The country is forecast to receive 11.5 million foreign visitors this year. This should provide the ideal conditions for further growth in the resort sector, said Savills.

Source: VNexpress

The Ministry of Construction has rejected a Ho Chi Minh City Real Estate Association proposal for housing developers to construct mini apartments that measure less than 25 square meters each.

The association has proposed the Ministry of Construction give the green light to developers to construction these mini apartment units for rent to replace many slums and cramped, dirty apartment buildings in Ho Chi Minh City that fail to meet both quality requirements and living conditions for tenants.

The Ministry gives the reasons of rejection

The association explains that the majority of low-income earners can afford to own these small units, which will result in a substantial improvement in their living environment and security issues. However, the ministry said the proposal was not in line with its Circular 20/2016 TT-BXD.

Specifically, the circular specifies households or individuals can develop rooms for rent with a minimum area of 10 square meters, as the majority of such individuals develop these housing units on their land that is usually not large. These regulations are aimed to encourage households or individuals to build homes for rent.

Meanwhile, the enterprises must cover at least 25 square meters to develop each budget housing apartment since they can secure vast areas of land to develop their projects. In addition to apartment units, they have to invest in technical and social infrastructure in order to guarantee residents’ quality of life, the ministry added.

Regarding a question by the Ho Chi Minh City Real Estate Association over funding for social housing projects to support the poor, the ministry said the Government has directed the Ministry of Finance to work with relevant ministries and agencies to map out a mechanism for partly covering interest rates for social housing apartments, which are budget homes for poor people.

Besides, the Ministry of Planning and Investment has been assigned to coordinate with the ministries of finance and construction to determine the amount of money needed.

The State Bank of Vietnam and the Vietnam Bank for Social Policy are responsible for devising interest rates. Then, the Prime Minister will have a final say on this.

Source: The Saigon Times

Macroeconomics

Vietnam remains an attractive destination for foreign investors, demonstrated by the substantial increase of 77.6% y-o-y in the newly registered FDI recorded in 1Q17. Among investors, South Korea, Singapore and China ranked the three largest sources.

Residential market

Both Ho Chi Minh City (HCMC) and Hanoi reported strong launching and sales activity in the first quarter of 2017. New launches came on a citywide and segment-wide manner in both main markets, and sales continued to respond positively to the new supply. The market witnessed good performance of both the investor and owner-occupier demand. In addition, thanks to the currently good market sentiment, coupled with more improvement in infrastructure development and the retail sector across the cities, prices extended their prevailing up-trends. Until year-end, good momentum in many facets of the residential markets is expected to be continued.

Office for lease market

Both HCMC and Hanoi market reported high-level net absorption rates in the first quarter of 2017, with HCMC mainly driven by the two new Grade B buildings and Hanoi led by Grade A and Grade B buildings completed in recent years 2015-16. In terms of rental rates, the Grade A segment in both markets reported q-o-q increases while the Grade B segment showed opposite trends. Some long-standing Grade B buildings in Hanoi quoted lower rents q-o-q in order to stay attractive compared to their competitors. Between now and end-2017, increased leasing activity is likely in both markets, with two new Grade A buildings expected in HCMC and five Grade B buildings expected in Hanoi.

Retail market

The retail markets in HCMC and Hanoi were quite stable in the Shopping Centre segment with no new supply. Rental rates in the Non-CBD areas of the two cities continued to experience decreases while those in the CBD areas reported different trends. Shopping centres in the HCMC’s CBD saw some slight increases in rents thanks to the increased footfall and openings of new flagship stores. The two markets in the remainder of 2017 are expected to be more active, with an addition of around 40,000-50,000 sqm of retail space to each market. The Convenience Store segment has experienced considerable growth in recent quarters and this is expected to continue into the remainder of 2017.

Source: JLL

Vietnam’s major cities are gearing up to develop homes for workers, planning to construct small studios of some 25-50sq.m at the price of 150 million (6,500 USD) per unit. The Vietnam General Confederation of Labour and Hanoi People’s Committee, at a recent dialogue with workers, said the capital city would develop small apartments at the price of some 5 million VND per sq.m, but with adequate infrastructure and facilities such as schools and supermarkets for workers.

Building more cheap apartments in major cities

This cheered low-income workers but also raised the question on whether the tiny flats would disregard plans and eventually turn into slums. Previously, the Ministry of Construction gave its nod to the construction of tiny studios of 25sq.m while developing technical standards for apartments.

Statistics of the Vietnam General Confederation of Labour showed that there were some 2.8 million workers at industrial zones, of which 1.7 million required homes, but the current supply could meet only 8-10 percent. The rest were forced to live in rented houses, mainly having poor living conditions, which impacted health and productivity.

Because of the high demand of homes for low income workers in major cities such as Hanoi, Ho Chi Minh City, Binh Duong and Dong Nai, efforts were hastened to build affordable homes for workers. The southern province of Binh Duong was the pioneer, building apartments worth 100 million VND for workers and achieving success.

Earlier this year, HCM City began studying the feasibility of building small affordable homes in the city. The southern city’s People’s Committee recently asked the municipal Department of Construction to prepare the plan of housing development for workers by 2020 and submit it within the second quarter of this year.

Hanoi’s Department of Construction, meanwhile, recently proposed to check the available land bank for housing development for workers and raised plans for expansion of the infrastructure system and social facilities such as schools and supermarkets. The capital city’s construction department will also study and introduce model worker apartments, ensuring decent living standard at industrial zones. According to Nguyen Chi Thanh, deputy director of the Vietnam Association of Realtors, developing affordable homes for workers is feasible if there is available land and special mechanisms for developers.

Source: VNA

The foreign investment is increasing in the real estate projects