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VIETNAM PROPERTY INVESTMENT | HO CHI MINH CITY

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Vietnam provides a real estate investment ecosystem full of energy colour and life, due in part to its dynamism and rapid development; the very foundation of its huge investment potential lies in its young and literate population (60% of a 94 million population are below 35 years old and literacy rate stands at 94.5%), emerging middle class (key cities at the forefront of Vietnam’s economic rise such as Ho Chi Minh, Hanoi and Danang are experiencing an increase in disposable income and demand for modern international quality offerings) , abundance of natural resources and land (Vietnam’s rich endowment makes it a significant import destination for certain produce and attractive country for investments due to access to raw materials).

Although unenlightened and deliberate policy decisions may have caused the excesses of recent years but Vietnam’s long term prospect prevails and opportunities remain available. The potential for capital appreciation in Vietnam’s real estate lies in its strong economic fundamentals: rising gross domestic product, positive demographics and large scale social infrastructure improvements. With increasing improvements to competitiveness and foreign direct investments, Vietnam is currently ranked above average on global indices with regards to productivity. Prospective investors can consider investing in a residential property in Vietnam for the following reasons:

  • As a primary and secondary residence
  • As a strong source of rental income due to significant rental yields
  • As a vacation property
  • For capital appreciation

Ho Chi Minh City

Ho Chi Minh City (HCMC) comprising of 19 urban or suburban districts and 5 rural districts is at the forefront of Vietnam’s economic drive and reforms. It provides one of the up and coming real estate investment destination in the world; filled with raw potential supported by favourable demographic and economic factors. A city under transition whereby the cityscape is dotted by evidence of the old making way for the new: modern skyscrapers rising up from among dilapidated buildings, modern designs replacing colonial architecture and local retail outlets replaced by global brand names.

Rapid improvements to infrastructure have allowed areas around the city once with difficult access to develop on a large scale. As migration to the city and urbanization continues to keep pace with each other, HCMC will need to develop all available land on the peripheries of District 1 the Central Business District (CBD) and plan for satellite urban centres in outlying districts to better utilize the finite space within the confines of the city. Thus, paving the way for a vibrant and dynamic real estate market loaded with massive investment opportunities.

The majority of real estate investments both domestic and foreign are centered in the Central Business District (District 1) and its fringes (Districts 3, 4, 5, parts of 2, parts of 8 and Binh Thanh). Additional areas of significance are satellite urban centres that are being developed in strategic areas around the city; they comprise of District 2 and District 7. Such areas typically offer high rental yields and capital gains in real estate investments.

HCMC’S main districts

District 1 (Central Business District)

District 1 embedded in the very center of HCMC doubles as the CBD and entertainment center. Here you will find a mix of narrow Vietnamese townhouses, conserved colonial French architecture and modern high rise buildings. Many companies will headquarter their offices and where the majority of food-beverage/retail locates. Although rising rents had pushed a lot of the simpler local street food and restaurants out, there remains a wide range of eating options with cuisines from around the world. While District 1 certainly gives out a different vibe to much of the city, it is still uniquely Vietnamese in character. The streets in District 1 are broad and generally tree-lined, and although it is the CBD the traffic is generally worse entering or leaving District 1 than within the district itself, so if you can afford to live in the CBD or like the bright lights of the city it can make an excellent choice to settle in.

Large high-end to luxury class residential properties and a few mid-end apartments can be found here, however inventory is typically limited. Prices for residential apartments across all market segments are the most expensive here. Future supply is also expected to be rather limited in the city centre, and as such prices are expected to appreciate steadily in the long-term.

District 2 (Satellite Urban Centre, East of CBD)

District 2 is a large and quickly developing district with two main areas. Thao Dien/An Phu consist of hundreds of villas, dozens of villa compounds and apartment buildings in one of HCMC’s most family friendly areas. This area within the district is popular among western expatriates and wealthy Vietnamese. On the other hand Thu Thiem is largely an undeveloped piece of land. However, due to its close proximity with District 1, the State’s urban planning has zoned this area as the new financial hub of HCMC. Infrastructure and plans are being out into place currently to rapidly develop this area.

The roads around Thao Dien/An Phu are fairly peaceful and not too scary to negotiate by bicycle. Many of the landed property here are very large villas with pools designed for lease to expatriates and some are even within walled/secured compounds, but there are still affordable houses available for rent. The number of eating and drinking options in this area is growing, with a number of nice bars, riverside cafes and amenity shops, which is a good thing since the commute to District 1 is generally around 30 to 40 minutes. Another characteristic of Thao Dien/An Phu is the location of several major international schools and kindergartens in the area.

District 2 is a still developing enclave of mid to high-end apartments, 2015 have seen a significant launch of apartments in Thu Thiem/An Phu area significantly adding to the inventory of apartments completed in this area. The existing trend of new apartment supply is significantly skewed to the East of HCMC, in large due to the nearing completion of HCMC’s Metro Line 1. Many are expecting are boom in property prices in this area in the near future.

District 3 (Northern Fringe of CBD)

District 3 traditionally is considered by many Vietnamese people to be the ideal place to live, with large, old colonial villas hidden behind trees, great proximity to District 1 and a decent quality of life. It is less westernized than District 1, but compared to much of central HCMC, is a very peaceful place with lots of local eateries. One popular Vietnamese expression states you should play in District 1 eat in District 5 but sleep in District 3. It certainly has many beautiful conserved colonial buildings but many have been adopted by the government while others are in varying states of disrepair.

District 3 is home to limited mid-end and luxury apartments. Significantly, most mid-end apartments in District 3 were completed years ago and recent trend for District 3 seems to be the luxury segment. Land prices and subsequently new launch apartment prices here are rather expensive, only slightly cheaper as compared to District 1.

District 4 (Southern Fringe of CBD)

District 4 used to be known as a lawless district, home to HCMC’s main port and many of the city’s poor gave rise to high crime rates here. This seems to be a thing of the past, and improved bridges and roads to District 1 has seen a recent steep increase in land prices as more high-end apartments and office buildings are built. In some parts of District 4 a commute into Downtown District 1 might only take 5 minutes, and rents are significantly cheaper than District 1. With the port earmarked to close in years to come and the whole area due for commercial redevelopment along the Saigon River transforming it into an upmarket area; it will be a planned extension of the CBD. But for now it is more of a thoroughfare between Districts 1 and 7.

District 4 in the masterplan plan for HCMC, sits on a privileged location, being next to CBD just across the Ben Nghe River, naturally it will be the most logical and natural area to broaden the CBD. District 4 is a potential place for you to buy or invest in real estate products, especially in the present time. Recently, many high-end apartment projects have sprout out in close proximity to District 1 as opposed to the development of mid-end projects previously.

District 5 (Western Fringe of CBD)

District 5 is a good choice for those seeking proximity to District 1, commutes range from 10 to 20 minutes, with lower congestion than some routes into the city, but with lower rents. District 5 is famed for its street food, and its history as HCMC’s Chinatown means there is a fair mix of cuisines in the area.

District 5 has very few notable high-end apartments and a whole inventory of mid-end apartments. Being close to District 1 and lacking good quality apartment supply have seen the District 5 residential market dominated by locals in the primary market sales segment. Foreigners still choose to rent the more notable high-end apartments in other districts. Secondary prices have dropped steeply in District 5 as the apartments age and with no significant supply in the pipeline, District 5 seems to have lost favour with developers in the high-end segment.

District 7 (Satellite Urban Centre, South of CBD)

A hallmark of District 7 is the massive Phu My Hung township project, located around 40 minutes’ drive to the south of District 1. Conceived as a ‘satellite town’ for HCMC, and has been designed from ground up with wide, tree lined roads and clusters of towering apartment blocks and villas. Since this area was properly conceptualized and built, it feels very much like a model urban town with green spaces, sports facilities, swimming pools and international schools/universities. There are many expatriates living here, the biggest group of which are East Asians such as Koreans and Taiwanese, but there are a growing number of Western expatriates too. Moreover, lots of well-to-do Vietnamese families are increasingly relocating to Phu My Hung to enjoy a higher standard of living.

Phu My Hung is certainly not your typical Vietnamese experience, but if you can’t take the noise and chaos of the city centre or wish to raise your kids with a bit of space to run around it is not a bad option. However, it is important to note that District 7 is not all Phu My Hung, there are outer lying areas surrounding Phu My Hung that makes up District 7 as well. These areas are generally characterized by urban sprawl, unplanned mushrooming of townhouses and slums, giving it a typical feel of a Vietnamese provincial town.

More and more projects are springing up in District 7 outside of Phu My Hung, specifically around major infrastructure links. The bridges to and from District 7 en-route to District 1 (Kenh Te Bridge) and District 2 (Phu My Bridge) are hotspots favored by realty developers. Large projects are changing the skyline of District 7 and a spilling over to the suburban districts around District 7. Pricing wise, due to buyer demand for apartments in District 7 coupled with strong rental demand, new launch prices have remained high.

District Binh Thanh

Binh Thanh District is squeezed between District 1 and District 2, and is known for cheap housing. However the area has seen near constant roadworks for over 3 years, and is the primary point of entry for hundreds of trucks that pour into HCMC every night from the industrial areas to the Northwest of HCMC. It is also very prone to flooding due to a lower then sea-level geography. Binh Thanh District shares a similar fate to District 4, but this district is progressing much faster as compared to District 4. This is due to the completion of major residential projects along the river side and well placed as a natural extension of the CBD.

Situated just Northeast of District 1, Binh Thanh District is blessed with favorable geographic location, and moreover, it is the existing thoroughfare to District 2’s Thao Dien/An Phu area, not to mention the industrial corridors that lie in Binh Duong and Dong Nai provinces to the Northeast and East of HCMC. Binh Thanh District remains highly favored by expatriates needing to travel the factories located in Binh Duong, Dong Nai and further away along the coast at Ba-ria Vung Tau. Along with the high-end to luxury segment of apartment supply, comes a whole plethora of supply in the affordable to mid-end segments, all looking to ride on the sales fever established by the more significant high-end projects. Prices are predicted to increase as the high-end projects continue to materialize.

District Phu Nhuan

Phu Nhuan District is another densely populated area of HCMC and has a number of main roads running through it. The area is certainly not without its charms with a number of parks and interesting street life, but traffic to and from this district can get pretty tiresome quickly. Still, if you work in Tan Binh District or anywhere near the airport, living in here can be a good option to be both near work yet also near social activities in the CBD.

As the main thoroughfare between Tan Son Nhat Airport and the CBD, it comes as no surprise that many developers choose the built apartment projects here. Owing to its small land area, high rise apartments seem to be logical to make good use of space. With more notable projects being built, the product mix in this district will shift towards mid/upper tier as previously only affordable to mid-end apartments are being built here. Average prices in Phu Nhuan District are also expected to increase as better quality products improve the general quality and concept of this district.

Vietnam: Key Statistics

Official Name: Socialist Republic of Vietnam
Administrative Areas: 5 Municipalities (Ho Chi Minh, Hanoi, Can Tho, Haiphong, Danang) and 58 Provinces
Total Area: 331,210 sq km
Major Cities: Ho Chi Minh City 7.298 million (2015)
Hanoi (Capital) 3.629 million (2015)
Can Tho 1.175 million (2015)
Haiphong 1.075 million (2015)
Danang 952,000 (2015)
Bien Hoa 834,000 (2015)
Language:

Vietnamese (Official),

English, Increasing emphasis on third languages

Currency: Vietnam Dong (Currency is controlled by government and pegged to US Dollar)
Time Zone: GMT +7 (Indochina Time)
Dialing Code: +84
Population: 94,348,835 (1H2015 est.)
Urban population: 33.6% of total population (1H2015 est.)
Urbanization rate: 2.95% annual rate of change (2010 to 1H2015 est.)
GDP: USD $510.7 billion (2014 est.)
GDP growth rate: 6% (2014 est.)
GDP per capita: USD $5,600 (2014 est.)
Unemployment rate: 2.5% (2014 est.)
Population below poverty line: 11.3% (2013 est.)
Human Development Index: 0.638 (2012)

*Statistics retrieved from CIA World Factbook.