Why Ho Chi Minh City’s residential market will prove to be a sustainable investment.
Just months after the liberalisation of Vietnam’s Housing Law on 1 July 2015, allowing for foreign property ownership, the majority of foreign buyers have yet to consider Vietnam as a property investment destination. Such muted response in a market highly rated by institutional investors and property developers (while individual buyers continue to invest in less competitive countries), continues to baffle. On a statistical note, the Urban Land Institute in collaboration with Pricewaterhouse Coopers, rated Ho Chi Minh City (HCMC) fifth on its 2016 Asia-Pacific invesment prospects ranking, behind only the likes of Tokyo, Sydney, Melbourne and Osaka.
To the sceptics, an overview of Vietnam’s real estate market will put everything into context. In 2008, at the height of the Global Financial Crisis, buyers were queuing up just to pick their choice units. From then on leading up to 2009, the bubble burst and things went downhill, leading to a frozen real estate market. Property prices deflated year-on-year from 2009 to 2013 before the market bottomed out in the lead-up to 2014 (prices in the primary residential market decreased as much as 40 percent over the said period). In 2014, the effect of government policies started to kick in and consumer optimism in the market returned. Primary residential prices rebounded by as much as 15 percent from 2014 to 2015, and this trend is predicted to continue for the next five years at least. Experts predict that 2016 will be another good year for Vietnam’s real estate industry.
At a time when overseas property investments have lost some of their shine due to internal and external turbulence, and the repercussions of China’s slowing economy is impacting countries popular with property investors, Vietnam is the one shining star amid the gloom. Given that Vietnam, and specifically HCMC, is a new market to foreign property investors and is ideally at the start of an upward trend in its property cycle, it provides an opportunity where there are more upsides than downsides to investments, making it very competitive for investors’ money. A brief look at the following reasons will easily identify the opportunities that Vietnamese real estate offers.
Legislatively, the revision of Vietnam’s laws now allow eligible foreign buyers to legally enter the country to purchase and own residential property. The types of projects available to foreign buyers include apartments, villas and townhouses (as long as they are part of a development, and not standalone units). Such property can be leased out, traded, inherited and collateralised, firmly placing the rights of foreigners over property on the same level as locals. Tenure shall be for a period of 50 years, renewable for a nominal fee for another 50 years, very much comparable to the majority of other real estate markets, like the Philippines and Thailand.