VN property market poised for solid 2016

Real Estate January 15, 2016 01:00

By Viet Nam News

Asia News Net

3,264 Viewed

The Vietnamese property market is entering 2016 after witnessing recoveries of firms in 2015, driven by macroeconomic improvements and policies of openness.

Still, there are concerns about the property market’s development. Viet Nam News reporters spoke to real estate service and consulting companies, a developer, an association and a bank about the development of the realty market and their expectations.

Mauro Gasparotti, executive director of Alternaty, or Alternative Real Estate Service Co, said Vietnam is offering the most exciting opportunities in the region, while the regional real estate markets are suffering.

Singapore is feeling the effects of heavy-handed cooling measures, Indonesia and Malaysia have seen rapid currency depreciation, Thailand continues to grapple with internal issues and Myanmar is seeing significant supply coming into the market, putting downward pressure on rentals and pricing.

Vietnam has come through an extended period of consolidation, and looks poised to lead the regional real estate markets over the next two to three years, he said.

At a recent conference held in Singapore on Southeast Asia’s real estate markets, Vietnam was voted the most favoured real estate market in the region. It is the real estate market that is expected to perform best in 2016, ahead of Thailand, Indonesia and the Philippines, besides Singapore and Myanmar.

"Regarding foreign capital inflow, I think especially the Trans-Pacific Partnership will be a game changer for Vietnam, to the same order of magnitude that WTO accession was in 2007.

Apparently, the 12-member TPP, in which Malaysia, Singapore, Japan and Vietnam are members, represents 40 per cent of the world economy and is expected to be the largest trade deal in this generation.

A recent Bloomberg headline said Vietnam might just be the greatest winner in the TPP.

Phan Thanh Huy, chief executive officer of real estate developer Novaland Group, said the property market has achieved significant growth in recent years, as proven by the transaction volumes and rising prices.

"We are optimistic the market will continue to grow, thanks to the economic recovery and rapid urbanisation. The increasing per capita income in the large cities of Ho Chi Minh City, Hanoi and Danang will further stimulate the market," he said.

"The support provided by banks will offer customers more opportunities to buy houses, making the market busier in 2016. All of these reasons, I think, will encourage real estate developers to bring more products into the market," he added.

Along with housing, the retail (shopping) and office segments are also expected to attract interest from developers. Demand in these segments, especially in HCM City, will rise sharply, thanks to the demand from foreign investors who keep pouring money to start or expand their business in Vietnam.

Matthew Powell, director of Savills Hanoi residential, said the office market and mergers and acquisitions will be the highlights. The highlights of the property market in 2016 are expected to be the residential market, the office market and M&A activities.

"In general, we have a positive outlook for the residential market in 2016. Macroeconomic factors are predicted to be stable, which will heavily influence residential demand going forward," he said.

In Hanoi, the company sees increased liquidity and rapidly increasing demand – from real end-users and long-term investors – driving the increase in transaction volume and the slightly increasing prices.

"One noticeable factor is the increased demand from the provinces and cities around Hanoi. Previously, this was limited to the high-net worth buyers from these areas, but we see a wider range of demand across the high, mid and affordable residential products.

"The confidence of the ‘average’ domestic buyer is much higher. He is the one who drives the market, to distinguish from the super-wealthy who generate most of the headlines, but actually are not the main drivers," he said.

In contrast to several years ago, the active developers of today are much more experienced, financially capable and understanding of buyers’ needs and demands. This is evident in the construction progress, and the increased focus on design, quality and facilities provided by developers. Lending by domestic banks is now much more stringent, but credit is flowing and the market depends on this.

"We predict the affordable housing sector will be stable going into 2016. This is being driven more by rising incomes and the high urbanisation rate in Hanoi, all of which create large and real demand," Powell added.

The year 2016 is also expected to be an active year for the M&A market, especially when many developers have gained strong financial capability and experience. Also, the fact that Vietnam is entering the global playground will provide the M&A market with more international developers, who are financially capable and committed to a long-term relationship with Vietnam.

Nguyen Van Duc, deputy president of the HCM City Real Estate Association, said he seex two existing problems that might cause a market imbalance.

First, there are hundreds of stagnating property projects. In HCM City alone, there are about 500 stagnant projects, resulting in a huge load of debts. Currently, there are no solutions to tackle this problem.

Secondly, developers are seemingly focusing on high-end residential projects, worth about 2 billion dong (Bt3.3 million) to 3 billion dong per unit, while largely ignoring the low-cost segment of below one billion per unit.

These problems are posing a risk to the property market. It was a supply and demand imbalance that contributed significantly to the property market freeze for years since 2008.

The market imbalance might become a crisis if there are huge fluctuations in the economy, such as soaring bad debts, inflation and the government tightening its belt, he said.