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HCMC real estate market spirals downward

The number of real estate transactions in HCMC has fallen 49 percent year-on-year in the first three months of 2019.

One of the problems facing the Ho Chi Minh City market stems from legal difficulties in selling projects. Photo by Shutterstock/Tommy Teo.

Transaction volumes in all segments – affordable, mid-range and high-end housing – have fallen. Absorption rate in this market also fell 8 percent compared to last quarter, Savills said.

The HCMC real estate market had decelerated in the last quarter of 2018, with 11,000 units sold for a 27 percent year-on-year drop.

According to Savills, the downwards trend in consumption seen in HCMC has followed a decline in supply. Total supply, which includes unsold units and newly built units in the last quarter of 2018, fell 44 percent year-on-year.

This number fell by a further 34 percent in Q1 2019 to just over 12,000 apartments, which represents a 57 percent drop compared to Q1 2018.

According to real estate analysts CBRE Vietnam, HCMC saw its one of its worst periods in the second quarter of 2018. Just 7,000 plus units were consumed, mainly due to negative sentiments after a fire at Carina Plaza, a 700-room apartment complex, killed 13 people and injured 28 in March.

Since then, the market had consistently underperformed based on year-on-year comparisons, according to CBRE. New supply in the third quarter of 2018 was just 6,711 units, down 14 percent year-on-year.

Despite seeing a surge in demand in the last quarter, consumption was still 16 percent lower than the same period in 2017, CBRE said.

Average prices of newly built apartments in the first 3 months of the year rose 3.1 percent compared to the previous quarter, and increased by 14.9 percent over the same period last year, CBRE said.

One of the problems facing the Ho Chi Minh City market stems from legal difficulties in selling projects, Le Hoang Chau, chairman of HCMC Real Estate Association, told local press. In fact, there is a lot of supply, but many fail to meet regulatory standards required to begin selling, he said.

Many projects get stuck at various levels from applying for approval from local authorities to getting permission to begin construction and to getting permission to begin selling.

These are major bottlenecks for investors, who just want to sell their inventory as soon as possible to recover capital, said Chau.

(source: vnexpress)

June 24, 2019 / by / in
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Domestic property price to be stable in H2

The domestic real estate market in the second half of this year is not expected to witness significant changes in price due to stability in supply, according to experts.

Customers look at a real estate project in Ha Noi. The domestic real estate market in the second half of this year will not see large changes in price. – Photo kinhtedothi.vn

During the last six months of this year, the medium- and high-end apartment market would not see any price fluctuations, said Nguyen Minh Ngoc, the Viet Nam Real Estate Association (VNREA)’s market researcher.

However, some products in those segments would experience a slight decrease in price because of more preferential selling policies for customers, he said.

The second half of the year would also be the period in which investors would have to boost liquidity to recover capital and prepare financial resources for investment next year, Ngoc said. Therefore, customers with low capital would find it easier to choose a suitable product.

According to the VNREA, the local property market will have a stable supply by the end of the year because the market has a large apartment inventory from the three previous years, though the supply of new apartments has dropped from the beginning of this year.

“The new supply has dropped but there is high inventory of apartments so sellers must have more policies for their customers to increase liquidity for collecting capital. Thus, the possibility of price increases will be very unlikely and the price could drop slightly compared with the same period in 2018 due to better selling policies,” Ngoc was quoted by the Kinh te do thi newspaper as saying.

“By the end of this year, the change of credit policy for the real estate sector in promoting control and reducing credit scale will have a significant impact,” said Nguyen Manh Khoi, Deputy Director of Housing and Real Estate Market Management Department under the Ministry of Construction.

Nguyen Tran Nam, VNREA chairman, said there was a concern about the real estate bubble, so the Government has taken steps to limit credit sources to real estate and the Government will be likely to tighten further in the future.

Thus, credit growth in real estate began to decline from the end of 2018. On the other hand, the volume of land for housing plans and compensation has been tightened while people’s purchasing power is still very strong.

From the beginning of this year until now, foreign direct investment (FDI) capital into Viet Nam’s real estate market has increased sharply against the same period in 2018 and reached the highest level in the last three years, reported vov.vn.

In fact, the new higher investment has not helped the release of more new products because the existing high inventory has made investors limit the increase of supply.

In addition, the land fund in big cities, such as Ha Noi, HCM City, Da Nang and Nha Trang, is in short supply.

Meanwhile, new projects are slow in developing due to difficulties in compensation and site clearance, leading to the scarcity of land fund and high land prices.

According to VNREA’s researcher Ngoc policies on real estate finance are having a great impact on promoting investment of businesses. Now, the Government has permitted the use of 40 per cent of short-term capital to be medium and long-term loans for property projects instead of 60 per cent as before and the percentage will be reduced to 30 per cent in the future.

The tightening of financial credit policy will force investors to build new mechanisms for their own development roadmap, and secondary investors will have to determine reasonable investment levels for their ability.

The Viet Nam Real Estate Brokerage Association said from the beginning of this year until now, new real estate supply tended to decrease, especially in two big cities, Ha Noi and HCM City.

Total housing supply in Ha Noi decreased by 25 per cent year on year while in HCM City, the reduction rate is even higher at 50 per cent of total supply.

Experts said that the decrease in new supply was due to high inventory of apartments over the last three years with total value of inventory at VND23 trillion.

Condotels were the product with the largest inventory. This segment in coastal provinces and cities had the absorption rate of only 40 per cent, thus its inventory was up to 60 per cent.

Future

The strongest points of Viet Nam’s real estate market are huge demand and ability of liquidity, according to Nam.

The local property market in the medium and long term will be very good as urbanisation will be very high. According to statistics, as many as one million people move from rural areas to urban areas each year. “The important thing is to have quality property products for them,” Nam said.

According to a report released by property consultancy Savills Vietnam, an optimistic economic outlook, high levels of FDI and suitable monetary policies ensure that growth in Viet Nam’s property market will continue, whilst increased supply is projected in key cities to meet demand.

The majority of stock by 2020 will be grade C in HCM City and grade B in Ha Noi.

The country’s two major cities, Ha Noi and HCM City, are undergoing dynamic transformations and attracting high levels of FDI and waves of new investment.

They account for 17 per cent of the country’s total inhabitants and have the highest urbanisation rates in Southeast Asia.

Strong population growth in urban areas has created robust demand for housing.

The majority of new supply comprises lower grade apartments, directly correlating with demographics and macro fundamentals.

Between 2014 and 2018, substantial sales increases occurred in both cities.

In HCM City, transactions have been rising by 44 per cent a year for the last five years, peaking in 2018 at above 49,000.

The absorption rate recently hit its highest level in the last five years of 87 per cent.

Last year, home sales in Ha Noi increased by 20 per cent. Between 2014 and 2018, grade B accounted for 43-61 per cent of sales and grade C for 31 per cent. Grade A accounted for 8 per cent due to a combination of high selling prices and limited new supply.

The performance of the high-end segment (grade A) has improved in the last three years, attracting local and foreign buyers with competitive prices and appealing rental yields.

Last year, Ha Noi and HCM City saw high demand from international buyers. Most grade A projects quickly filled the foreigners’ quota of 30 per cent.

(source: VNA)

June 24, 2019 / by / in
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Saigon apartment prices jump as licenses dry up

Buildings seen in downtown Ho Chi Minh City, Vietnam. Photo by Shutterstock/Sam.

Condominium prices in Ho Chi Minh City rose by 10 percent a year between 2014 and 2018, Savills estimates.

A recent report by the real estate market research firm said in the period the number of transactions increased by 44 percent a year, peaking in 2018 with over 49,000. At the end of the period the average price was $1,600 per square meter.

Grade A (high-end segment) experienced the highest price rise, while grades B (mid-priced) and C (affordable) grew at a slower pace.

The absorption rate also hit the highest ever rate of 87 percent, with growth being particularly evident in grade C, which accounted for 60 percent of all transactions in the 5-year period.

Grade C is dominated by occupiers/end-users while grade B attracts upgraders and buy-to-let investors and grade A buyers are mainly long-term investors. Savills expects the majority of stock to be grade C until 2020.

A survey by VnExpress has found that the supply of affordable housing is gradually declining across the city as a result of authorities licensing few housing projects in 2018-2020.

According to the housing development plan for 2016-2020 with orientation until 2025, that was approved by the HCMC People’s Committee last November, the city will not approve construction of new high-rise apartments in inner city areas (District 1 and 3) until 2020.

This scarcity has sent apartment prices in both the primary and secondary markets surging, and as a result cheap housing projects are being moved to neighboring provinces like Binh Duong, Dong Nai and Long An.

Real estate services firm CBRE in a report on the first quarter said the average price in the primary market increased by 3.1 percent quarter-on-quarter and 14.9 percent year-on-year.

(source: vnexpress)

June 20, 2019 / by / in
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Condotel legal framework imminent

Condotel developers and buyers will breathe easier later in the year when the legal framework for the new type of property in Vietnam is to be released.

A huge increase in the condotel segment over the last five years has hastened the implementation of new regulations, Photo: Le Toan

At the discussions of the National Assembly held last week, Minister of Construction Pham Hong Ha said the standards and regulations on management and operation of condotels and officetels would be issued within 2019, to avoid any negative impacts on the new segment.

“Local authorities cannot manage thousands of condotels without a legal framework,” Ha claimed at last week’s meeting in Hanoi, adding: “We have worked with the Ministry of Natural Resources and Environment to review regulations on land use in order to consider giving ownership for this type of property, since it has not been included in any regulations so far.”

The Ministry of Construction (MoC) is now co-ordinating with the ministries of Culture, Sports and Tourism, as well as Natural Resources and Environment, along with local authorities to issue the regulations for this type of property. “This task must be done as soon as possible because there are signs of oversupply of condotels in the market recently,” Ha said.

Meanwhile, Nguyen Trong Ninh, head of the MoC’s Department of Housing Management and Real Estate Market, said as condotels have been listed in accommodation for tourism, then they must be regulated under the legal framework of the tourism sector, now under the Ministry of Culture, Sports and Tourism. Accordingly, condotel developers must be given licences by the Vietnam National Administration of Tourism.

Economist Nguyen Tri Hieu commented that the function of condotels is not yet clearly identified as for living or leasing. “If it is a product for lease, it must obey all taxation and land use regulations for business. In this case, a clear legal framework can help condotel developers take a mortgage at the bank for mobilising investment capital. If it is a housing product, it can be given a land use certificate so that owners’ rights can be protected,” Hieu said.

Meanwhile, Nguyen Tran Nam, chairman of the Vietnam Real Estate Association, emphasised that it was necessary to have a flexible plan for condotel development and investment.

“The fact is that thousands of condotels units are being constructed and any regulation would be a great impact to those, therefore the incoming regulations must be harmonised to benefit different sizes, and to benefit developers, buyers, policymakers, and local authorities,” Nam said. “The planning should be based on demand and must be designed to create demand.”

Some localities such as the central province of Binh Dinh reported that the province has experienced dramatic increases in tourism after a condotel project is developed and lessons can be learnt from this case.

Nguyen Toan Thang, director of the Ho Chi Minh City Department for Natural Resources and Environment, added that the legal framework for condotels will help developers and buyers to believe in the prospects of the condotels they have bought.

“A legal framework would facilitate the socio-economic development of any locality. Legal frameworks must be continuously updated to be suitable to the increasing demand of society,” Thang said.

According to the MoC, a condotel is a type of condominium and hotel unit not regulated in the current laws of Vietnam such as the laws on Land, Real Estate, Investment, and Housing.

The supply of condotels in the country has been strongly increasing, and now occupies 56 per cent of the total rooms for tourists, while hotel rooms occupy 44 per cent only.

Since 2014, many condotel projects have been built nationwide, especially in coastal localities such as Quang Ninh, Thanh Hoa, Danang, Quy Nhon, Nha Trang, and Phu Quoc Island. It is estimated that in 2020 there will be around 20,000 condotels units up for sale.

(source: vir)

June 18, 2019 / by / in
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Vietnam’s property ceremony nears

The annual Vietnam Property Awards, the country’s largest and most reputable real estate awards platform, is back for a fifth consecutive year.

The presentation of the Vietnam Property Awards will take place in August in Ho Chi Minh City

More real estate investors are beginning to notice Vietnam as a popular destination. With a thriving economy, and recent legislation making it easier for property investors to conduct business, the Vietnamese market has emerged as a hotspot for property investment.

There has been a giant influx of both local and international developers, all keen to get recognition from professionals, and thus develop their credibility with customers.

Vietnam’s realtors have that support via the industry-leading Vietnam Property Awards, which is held by Asia’s leading property portal group, PropertyGuru.

As part of the Asia Property Awards, a programme established in 2005, the Vietnam Property Awards are considered the most credible real estate awards platform in the country. The platform provides a venue to acknowledge the extraordinary achievements of Vietnam’s best developers and developments.

Vietnam’s local competition was introduced in 2015, and has earned praise from both participants and senior industry partners. At the fourth annual gala dinner in 2018, a total of 43 awards were presented to more than 25 companies and public-private entities.

Winners included CapitaLand Vietnam, KIEN A Corporation, Alpha King, and SonKim Land Corporation. SonKim Land went on to achieve the Best Boutique Developer in Asia at the regional Asia Property Awards Grand Finale ceremony in Thailand.

“In my new role at PropertyGuru, I am thrilled to join a team of like-minded professionals whose mission is to recognise, promote, and celebrate quality. I look forward to working with the team and taking the awards to new heights,” said Jules Kay, the recently appointed director of the Asia Property Awards.

The PropertyGuru Vietnam Property Awards has an unparalleled reputation for being credible, fair, and transparent. The competition is free to enter and the contestants are judged by an independent panel of experts.

Furthermore, to ensure the utmost impartiality throughout the competition, the judging process is supervised by BDO, one of the world’s largest auditing and accountancy networks, which has supported the programme for more than a decade.

This year’s winners will be announced at an exclusive gala dinner and presentation ceremony on August 23 at the InterContinental Saigon Hotel in Ho Chi Minh City. The occasion will be the culmination of a series of thorough judging stages, which includes the screening of nominations from the public, site visits for entrants in the development categories, detailed inspections, and final judging deliberations.

More than 500 distinguished guests and key figures in the sector will join the ceremony, including members of the Vietnam Real Estate Association, the country’s largest property organisation.

With recognition for outstanding design, construction, customer care, corporate social responsibility, green developments, and public facilities, the gala ceremony will present more than 40 competitive and special awards, showcasing the highest standards of Vietnamese real estate.

PropertyGuru’s Vietnam Property Awards has set a high benchmark, and each year the competition surpasses the expectations of the independent judging panel. With the upcoming competition, the awards will continue to ensure that the achievements of Vietnamese real estate professionals are recognised and showcased to a wider regional audience.

(source: vir)

June 11, 2019 / by / in
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Ho Chi Minh City ramps up real estate

In an effort to become more attractive to investors and feature more modern infrastructure, Ho Chi Minh City is intensifying development of its urban real estate market. Quynh Chau reports.

Projects from high-rise apartments to a safari park are on the lookout for funding, Photo: Le Toan

Paths to choose investors under current legal framework

– Decision or written ­approval of investment ­policy (based on the laws on Investment and Housing) for projects that ­investors have legal land-use already.

– Auction of land-use rights (based on the laws on Land Law and Property Auction) for projects located on clear land and compensated areas and projects which have assets on the site, and those assets are under state ownership.

– Bidding to select investors (based on the Bidding Law) for projects located in highly-valued land areas which need to be given into selection in order to build new urban areas, commercial housing and service projects, and multi-­functional complexes.

– Public-private partnership (based on the Bidding Law) in cases of projects with contracts between competent state agencies and ­investors to construct, ­renovate, operate, manage, and provide public services.

Ho Chi Minh City is offering a list of major projects which ­desire investment, with some already ­attracting ­interest from ­foreign investors.

Thu Thiem Financial Centre, located in Thu Thiem New Urban Area of District 2, estimated at VND5 trillion ($217.4 million) of investment capital, is one of the most attractive projects.

According to the Ho Chi Minh City Department of Planning and Investment, ­potential investors of the ­project should directly contact the Thu Thiem Management Board for further information.

Expected to be constructed from this year until 2021, the scheme will develop two high-rise towers with an expected height of between 20 and 50 storeys. When completed, Thu Thiem Financial Centre will be home for financial institutions, banks, investment funds, and other economic groups.

Land compensation has been completed at the site and many investors have registered to take part. Among them are domestic REE Corporation, Ho Chi Minh City State ­Financial Corporation, and a joint venture between 216 JSC and Van Phu Invest.

Meanwhile the initiative is also on the radar of foreign ­investors such as American-based Steelman Partners, and a joint venture between ­Australian group Sakkara and Singaporean group GIC.

The Ho Chi Minh City People’s Committee has ­also approved procedures for a list of 160 projects which can be developed over the next year.

Dai Quang Minh Real ­Estate JSC was approved for setting up an infrastructure ­system for three projects in Thu Thiem New Urban Area.

The $1.42 billion urban ­development area in Binh Quoi-Thanh Da was also ­recently seeking new investors after the withdrawal of ­previous developers, a joint ­venture between Bitexco Group and Dubai Emaar ­Properties.

The Binh Quoi-Thanh Da Urban Area project is the ­second-largest urban development project in the city after Phu My Hung Urban Area, but it has been in a stalled state for 18 years.

Another project highlighted is the $500 million Saigon Safari in Cu Chi district on the outskirts of the city. This project is now on the list for calling for investors after ­Vingroup withdrew from it ­recently, claiming that it is ­required to focus on its core business.

High potential for investors

According to Le Thi Huynh Mai, director of the Ho Chi Minh City Department of Planning and Investment, the city so far has offered plenty of advantages for investors.

“We are all aware that ­improving the business ­environment is one of the most important issues for us to lure investors,” Mai said. “We have simplified ­procedures, offering enough legal frameworks, as well as ­incentives for foreign developers.”

She analysed that one of the most difficult parts for those implementing their projects was the barriers on land clearance and compensation.

“Local authorities have been struggling to keep up with their land clearance and compensation commitments and they have been looking for ways to shorten the process,” Mai said.

All of these projects, Mai added, were attractive for investors. The problem was how to implement them in the most effective way.

According to Nicolas ­Audier, co-chairman of ­EuroCham Vietnam, many ­European companies have chosen Ho Chi Minh City for investing. “This proves that Ho Chi Minh City is a magnet for foreign investors, even though the city authorities still have many things to do to improve its investment environment,” Audier said.

There are many major fields in which foreign investors could join, Audier added, including real estate, urban planning, infrastructure system improvement, setting up smart and innovative cities, and green development.

Bottleneck breakthrough

In an effort to push up the urban development of the city, the local authorities have recently approved permits of 124 projects which were previously suspended for investigations and inspections.

The Ho Chi Minh City Real Estate Association (HoREA) had earlier written to the municipal authorities and the Government Inspectorate proposing quick reviews and processing of 100 halted projects.

The HoREA noted that further extensions would cause the developers of these projects to face losses from higher costs and rising loan interest rates, while they miss out on business opportunities. The high number of stalled projects has resulted in a sharp fall in the number of homes available to be put into service, thus damaging the local real estate market, the association added.

In addition to this, the local construction department has recently approved the investment procedures of another 160 projects. The projects have been approved due to their investors successfully proving they had strictly obeyed all of the regulations and detail plans which were previously committed. Among those, the southern area of Ho Chi Minh City including districts 7 and 8, Nha Be, and Binh Chanh have the highest number of approved projects, at 53.

The eastern part of the city in districts 2, 9, and Thu Duc followed with 48 projects, while fewer projects have thus far been approved in city centre districts 1, 3, and 4.

(source: vir)

June 6, 2019 / by / in
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Saigon, Hanoi premium office rents rise on low supply

The HCMC and Hanoi premium office markets continue to be undersupplied with no new buildings coming online in the first quarter.

In HCMC, the average asking rent for grade A office space has edged up to $52.2 per square meter per month from below $50 in the fourth quarter of last year, according to a report by real estate firm Colliers International Vietnam.

In Hanoi, rents were up to $35.9 from below $35.

“Rents are expected to continue to rise thanks to strong demand for office space and Hanoi’s improving economy,” the report said.

With no new building came online in Q1 2019, HCMC sees rising occupancy rate and rent. Photo by Shutterstock/Ho Su A Bi

The HCMC and Hanoi premium office markets continue to be undersupplied with no new buildings coming online in the first quarter.

In HCMC, the average asking rent for grade A office space has edged up to $52.2 per square meter per month from below $50 in the fourth quarter of last year, according to a report by real estate firm Colliers International Vietnam.

In Hanoi, rents were up to $35.9 from below $35.

“Rents are expected to continue to rise thanks to strong demand for office space and Hanoi’s improving economy,” the report said.

Both cities have high occupancy rates. In HCMC the first quarter rate was 95 percent, while in Hanoi it was 96 percent.

Despite their high rents, grade A offices are still preferred by large international companies in HCMC due to their ease of access, premium image and facilities.

In Hanoi, the improving infrastructure would continue to attract big-name office tenants to the market such as banking, finance and insurance companies.

The west of Hanoi is the up-and-coming office destination in the city thanks to the availability of land, well-established infrastructure and large supply of residential projects.

The low supply situation is set to improve with five new high-quality office buildings set to open this year in HCMC with 150,000 square meters of leasable area. Hanoi is also likely to add 150,000 square meters this year, Colliers said.

“Both cities are seeing the flexible workspace and coworking space market grow to cater to high demand from startups and small and medium enterprises.”

In the first quarter the average occupancy rate in this segment was 85 percent in HCMC, and this emergent market is promising to expand massively in the upcoming quarters, it added.

(source: vnexpress)

 

June 5, 2019 / by / in
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Evaluating the progress of foreign property ownership across Vietnam

Entering into force in July 2015, the Law on Residential Housing No.65/2014/QH13 and the Law on Real Estate Business No.66/2014/QH13 partially lifted the barriers for foreigners pouring money into Vietnam’s real estate market, and thus opened the floodgates for overseas investment in this sector. The two laws have not only simplified the legislation, but also expanded the rights and protections afforded to investors while maintaining certain restrictions to keep them from overrunning funding into Vietnam’s real estate opportunities.

Among the notable changes, international investors are now permitted to acquire 30 per cent of apartment units within one apartment building or 250 individual residential houses comprising villas and terraced houses in one ward. This change is encouraging as non-Vietnamese individuals were only allowed to own one apartment unit in an apartment building prior to the implementation of the new laws.

They also loosened restrictions and conditions imposed on foreign investors whereby individuals are allowed to own residential property without residency status or have any investment in Vietnam as long as the individual enters the country with a valid passport. This makes it more accessible for foreigners to invest without the need to go through stringent conditions which may not be proportionate to the investment return and thereby deter foreign backing in the country.

Further, foreign-invested enterprises can now lease real estate for sub-lease, and this was not available to them prior to the implementation of the new laws.

While they have brought about changes welcomed by overseas investors and thus encouraged more investments, there is still room for improvement, particularly in relation to the different treatment ­between local and foreign ­investors, and the implementation of a level-playing field between them so as to ­increase competitiveness in the real estate sector.

In terms of the land-use right certificates issued to foreign individuals for residential houses in a residential project, they will only be granted a term of 50 years while local investors are entitled to an indefinite term. Although an extension of 50 years is available, the right to extend the term is not tested and the conditions for extension are not provided in the legislation. The purpose intended to have different terms of the right to use the land is not known, and it discourages foreign investment as the remainder terms affect the liquidity of the sale to non-Vietnamese buyers. The sale of the property is also inhibited as the pool of buyers is limited to locals who will enjoy an indefinite term of use upon purchase of the property from foreigners.

Similarly, as the percentage of foreign ownership in a single apartment building is limited to 30 per cent, any sale of apartment units may face the same limitation. The pool of buyers will inevitably limit the price that the owners can obtain if the quota for foreign ownership in that particular apartment has reached the allowed percentage and so, sale to potential overseas buyers will not be permitted.

With the government’s commitment to ensure growth of foreign investment in Vietnam, and the optimism in the market as demonstrated by international investors, it is hoped that their rights in the real estate sector will further improve to allow them the same rights as local investors in all areas of real estate investment, and clear and consistent guidelines will be provided to increase competitiveness in the real estate sector. We have to remember that the doors to foreign ownership in real estate only cracked open in 2008 but in the 10 years since, the government has made considerable advances in opening this sector and we have reasonable expectations that this trend will continue further in the future.

By Kevin Hawkins – Co-executive partner ZICO Law Vietnam

(source: vir.com.vn)

May 30, 2019 / by / in
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Strong demand for high-end property

With robust economic growth in Vietnam for the past several years, foreign buyers are diving into the real estate market as is evident by the pent-up demand from those looking to buy. Bich Ngoc reports on the most attractive segments so far for overseas buyers.

Since 2015 when Vietnam legalised foreign property ownership, the market has been receiving increasing interest from foreign buyers, specifically Asian investors taking advantage of the bargain price compared to the rest of the continent.

Henri Limyuen, a 36-year-old from the Philippines, told VIR that he is looking for a suitable apartment to buy in Ho Chi Minh City. Limyuen was visiting a launching ceremony of the Rome Residential project which is located in District 2. He said he has worked and lived across different Asian countries, and Vietnam is a top destination of his in terms of purchasing a home. “I think the regulations to permit foreigners to buy a house in Vietnam are open, and I see an opportunity for a good house here at a much cheaper price compared to other neighbouring countries,” he said.

Limyuen added that the price of homes in Vietnam still remains lower than those in other neighbouring countries such as Singapore or Thailand. Buying an apartment in Vietnam, he can live in or lease it to have rental yield which is also higher at around 7 per cent per year, compared with only 2 per cent in other countries.

With robust economic growth enjoyed over the past several years, foreigners, especially from Hong Kong, Taiwan, South Korea, and mainland China are finally diving into the real estate market. The trend is evident by a pent-up demand from overseas nationals looking to buy.

Nguyen Hoang, director of research and development of real estate consultancy DKRA, said that since 2017 Chinese mainlanders have increased their interest in buildings in Ho Chi Minh City, especially luxury and premium apartment units. Most come from Shanghai to buy homes in Vietnam for investment purposes.

At the end of last month, a group of more than 30 real estate agencies under Asia Bankers Club from Hong Kong came to Vietnam to visit River Panorama and Sky89 developed by An Gia Group and take a better look at the Vietnamese real estate market, as well as promote Vietnamese projects abroad. Asia Bankers Club, which is one of the most active international real estate investors operating in Vietnam, has co-operated with many developers in the country such as Keppel Land, CapitaLand, Gamuda Land, and other domestic developers.

Asia Bankers Club had been looking into Vietnam for quite some time, but what really awakened its interest was when Vietnam loosened the rules on foreign real estate ownership.

Luxury and premium on the rise

The luxury and premier residential projects in Ho Chi Minh City has seen most attraction from foreign buyers coming from Asian countries.

Property trading centres and consultants noted that luxury and high-end apartment projects in downtown Hanoi and Ho Chi Minh City are attracting the greatest interest from foreigners who are eligible to buy property in Vietnam. These are mostly individuals who buy property and then re-lease it for a rental fee or re-sell it for profit.

In Hanoi, major projects located in the city centre – the heart of culture in Hanoi – and around the West Lake, which offers the greenest living space of the whole city, are attracting strong foreign interest. The Manor and Keangnam Landmark Tower in Hanoi are favoured by South Korean buyers, while Ecopark, Ciputra, Sunshine City, Eldorado, and Pacific Place are very popular among foreigners.

Meanwhile in Ho Chi Minh City, Phu My Hung New Urban Area remains a popular destination for its advantages of being very well planned and for having good infrastructure. Some high-rise projects in Phu My Hung are now reserved especially for the South Korean and Japanese community. Phu My Hung has a population of 30,000 people, of whom 40 per cent are foreigners, including buyers and leasers.

Some other outstanding projects are Vinhomes Golden River and Vinhomes Central Park, both invested by Vingroup, The Nassim by Hongkong Land, and Keppel Land’s Estella Heights.

In 2018, purchases by foreigners reached unprecedented levels with the vast majority of high-end projects hitting their 30 per cent foreign quota at launch. One of the main reasons foreign buyers focus on high-end apartments is the buy-to-let method. High-end apartment projects in districts 2 and 9 of Ho Chi Minh City now receive a rental yield of 6-8 per cent, which is considered acceptable for investing.

Meanwhile, vacation and hospitality properties in the coastal areas are also garnering interest from foreign buyers. the southern cities of Vung Tau and Phan Thiet, the central cities of Danang and Nha Trang, the northern province of Vinh Phuc and the northern port city of Haiphong are all popular destinations for foreign buyers seeking a second home.

According to CBRE Vietnam, through only CBRE’s successful transaction, only 2 per cent of the foreign buyers was Chinese in 2016 and 4 per cent in 2017. This rate however increased to 31 per cent in the third quarter of 2018.

“The reason for Vietnam’s property market is more attractive to foreign investors, was because the Vietnamese government has opened up for foreign buyers since 2015,” said Dung Duong, senior director at CBRE Vietnam “Moreover, Vietnamese developers have also actively bringing their projects abroad, to introduce to potential buyers.”

Foreign ownership limit

According to many experts, since the home ownership ceiling for foreign buyers currently being reached in several estate projects, it should be considered to be loosened.

Bui Quang Tin, general director of BizLight Business School, said that as bank credit for the real estate sector is tightened while other capital sources, such as the stock market, are more difficult, it is necessary to lift the foreign ownership limit to lure more foreign investors. “The rise should be made gradually, to 35 to 40 per cent in the immediate future, instead of 30 per cent currently,” Tin said.

Meanwhile, Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association, maintained that local authorities should issue as soon as possible the “certificates of homeownership/land-use rights” for foreigners. At the same time, effective measures should be taken to prevent illegal foreign estate business or speculation in Vietnam.

According to Chau, foreign direct investment in the realty industry is an important capital source for developers in the context that commercial banks are tightening their control on credit for real estate.

Official figures on the number of foreigners and overseas Vietnamese owning homes in Vietnam remain undisclosed. However, according to the Ministry of Construction, there are fewer than 200 foreigners and fewer than 700 overseas Vietnamese who have already received a red book or the ownership certificate in the country. This is a very modest proportion of the 100,000 foreigners and five million overseas Vietnamese who live and work in the country. (source: vir.com.vn)

May 30, 2019 / by / in
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Government ignores affordable housing: experts

Hoang Thi Thuy Van, 48, of HCM City’s Thu Duc District, was able to buy a low-priced apartment four years ago because of a preferential credit package, but many people still cannot afford to buy a home.

“I feel much more fortunate than many of my colleagues who have not been able to buy an apartment,” she told Viet Nam News.

Current housing prices are too high for them, no matter how much money they save, she said.

“I once thought of moving closer to the city centre in Binh Thanh or Phu Nhuan districts, but have decided to give up as the price is far beyond what I can afford,” she said.

Four years ago, the State Bank’s preferential loan credit package of VND30 trillion (US$1.29 billion) helped thousands of low-income people purchase low-cost apartments in big cities.

However, since the credit package stopped disbursing funds in mid-2016 many people have given up their dream of home ownership because of surging prices.

The real estate market has experienced several so-called fever periods in recent years, pushing up property prices to a level that is unaffordable for people with low or modest incomes.

For example, a 70-sq.m one-bedroom apartment in an upscale project in Binh Thanh District which borders District 1, could cost up to VND4.5 billion (nearly $200,000), a broker in the district who has been in the industry for 10 years told Viet Nam News.

A small house in a side alley without access for a car in District 4 or Phu Nhuan District could cost up to VND5 billion ($215,000), he said.

For houses on large streets in central districts like districts 1, 3 and other nearby districts like Binh Thanh, Phu Nhuan and District 4, the prices were too expensive for most people, the broker said.

Huge demand

The real estate market is suffering a severe shortage of affordable homes despite huge demand, experts have said.

The property products in the country do not match market demand, especially in major cities like Ha Noi and HCM City. The supply of high-end apartments is plentiful while there is a shortage of affordable housing.

Since mid-2017, the Grade C apartment segment (affordable apartments priced under $1,000 per sq metre) has seen a sharp decline in supply, according to research conducted by DKRA Viet Nam, a joint-stock property company.

Grade A apartments (high-end segment priced from $1,800-3,000) and Grade B apartments (mid-range segment priced from $1,100-1,800) are far more plentiful than Grade C apartments.

Worse still, there are times when the affordable segment has no new supply, according to DKRA’s research.

Under the VND30 trillion loan package administered previously by the government, homeowners could buy an affordable apartment with an area of 70 square metres or below at VND15 million per square metre.

Le Hoang Chau, chairman of HCM City Real Estate Association (HoREA), said the imbalance between supply and demand in the affordable segment was a sign of unsustainable development in the market.

The affordable apartment segment accounted for the smallest proportion of available housing, followed by the mid-end and high-end segments, which should instead account for the smallest percentage, he said.

“It’s very likely that affordable housing will not even exist in the near future unless the Government takes action,” he noted.

In a recent meeting between real estate businesses and HCM City leaders, Nguyen Van Duc, deputy director of Dat Lanh Real Estate Company, said the supply of low-cost housing had gradually plummeted in the city in recent years.

More than 10 years ago, some real estate enterprises in the city such as Khang Gia, Nam Long, Dat Lanh and Le Thanh invested in low-priced houses.

“However, not many of them are implementing such projects now,” he said.

Dat Lanh Company, for example, faced a shortage of capital to implement new low-cost projects.

The lack of investment was due to low profits from such housing, Duc said. If material prices or bank interest rates increase, the company could face losses.

“Investing in low-cost housing has low profits, only about VND1-2 million per square metre,” he said.

Le Huu Nghia, director of Le Thanh Real Estate Company, said that real estate businesses were more interested in high-end housing because of far higher profits.

The problem had been made worse by challenges in accessing credit, complicated administrative procedures and a lack of land available for construction, he said.

Recommendations

Experts say that Viet Nam should develop new preferential policies in land, tax, interest rates, credit and mortgages for affordable home developers, and allow the development of apartments of different sizes.

Developing affordable homes is an urgent issue as rapid urbanisation is putting pressure on city infrastructure, such as power grids, water networks and schools, they said.

Chau, chairman of HoREA, said: “The demand for affordable housing is huge in HCM City, and regulations on low-cost housing should be issued.”

According to statistics from the Central Institute for Economic Management, on average more than 1 million people migrate from rural areas to large cities like Ha Noi and HCM City each year. The figure is expected to continue to rise.

It is estimated that demand for affordable homes accounts for around 60-70 per cent of total market demand, but the supply is less that 20 per cent.

Apartments of less than 60 square metres with prices of less than VND700 million ($30,090) account for only five per cent of market supply.

According to statistics from the Construction Ministry, by next year around 1.7 million people will be in need of homes in urban areas together with 1.7 million workers demanding stable accommodations, requiring the development of nearly 1 million apartments.

Source: VNA

May 29, 2019 / by / in
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