Markets & Prices

Last updated: Wednesday, May 15, 2019


Is It Good Time to Invest in High-end Real Estate in Vietnam?

Posted: Tuesday, March 05, 2019

2018 is a landmark year with rapid changes in the Vietnamese housing market. Transactions with foreigners grew unexpectedly and accounted for about 30% of high-end projects when launched.

Luxury segment has attracted customers

Mr. Neil MacGregor, Savills Vietnam Managing Director, analyzed that the Vietnamese economy has continuously received positive news: the national GDP has kept growing among the best developing economies in the world. FDI has continued to increase rapidly, remittances have reached a record level. At the same time, foreign exchange reserve has also reached the highest level, which has actively supported the Vietnamese dong. These are the good macroeconomic conditions that are driving the growth of the high-end real estate market in Vietnam.

Mr. Neil MacGregor pointed out that the economy continues to be driven by golden population structure, positive economic prospects and new infrastructure projects. Ho Chi Minh City and Hanoi are entering the transition phase and are on par with other cities in the region. The apartment market will develop due to strong housing demand, while the high-end segment is attracting the attention of the super-rich class in the country and the region. In the context of abundant capital, an increase in foreign investors and suitable macro policies, the housing market has optimistic growth prospects.

Savills market statistics suggest that apartment prices in Ho Chi Minh City and Hanoi are generally lower than comparable markets in the region such as Kuala Lumpur and Bangkok, although the growth in Ho Chi Minh City is higher when compared to these markets. The average price is expected to continue to rise but more slowly, this price increase will partly reflect on higher development standards, strong housing demand, rapid urbanization, the boom of middle and upper classes as well as convenient infrastructure.

One of the reasons, why real estate in Vietnam is more attractive than other countries in the region, is that the new house price in the city center of Ho Chi Minh City is maintained at the average of about US$5,500 - 6,500 /m2, much lower than Hong Kong. Housing taxes in many countries become higher while this tax rate in Vietnam is relatively low, attracting domestic and foreign buyers. Therefore, it is not surprising that the demand for real estate investment in Vietnam has increased significantly since the housing ownership policy for foreigners came into effect in 2015. With a clear shortage in high projects in big cities, buyers can see the potential of clear increase in the long-term capital. Meanwhile, with rental profit exceeding 5%, this is an attractive investment channel compared to the declining profit in other locations in the region.

The Savills Vietnam's Managing Director analyzed that the emergence of more and more long-term investment opportunities in the high-end housing segment, especially when economic indicators are still outstanding, buyers will completely benefit from increased investment value. The road for Vietnam's real estate market to reach its peak like Hong Kong and Singapore is still long, but with strong economic growth, booming middle class and affordable prices, Vietnam market still has much room to develop.

Three key markets

High urbanization rates and developed infrastructure have opened up many development opportunities for high-end products in key cities like Hanoi, Da Nang and especially Ho Chi Minh City.

In the Hanoi housing market, many projects in 2018 were well received by the market, especially in the villa, duplex villas, house segments as well as some land segments. Thanks to the rapid urbanization rate, the advantages in transportation system and improvement in infrastructure, the investors are putting great trust in luxury real estate products in Hanoi.

Mr. Duong Duc Hien, Director for Residential Sales of North and Central Vietnam at Savills Vietnam, said that the land segment in Da Nang was very active and vibrant. Resort products with committed profit are not necessarily the optimal products. On the contrary, products, which have the potential to increase value in the future, clear ownership with limited numbers, have a return signal. In 2019, Da Nang will continue to have quality products, transparency, and clear ownership to introduce to the market. Investors expect next year, this market will also bring urban products and not only products with resort factors.

Mr. Nguyen Khanh Duy - Director for Residential Sales, Savills Ho Chi Minh City analyzed that the potential development of the million-dollar housing segment in Ho Chi Minh City was very good. In fact, the demand for penthouses or million dollar villas today is much more than before. Currently, to name the housing projects that can meet the above criteria is not really much.

By combining elements of scarce supply, increasing demand and potential for value addition, it can be seen that the super-rich are not merely looking for a great home to stay in, but also looking for an ideal channel for hoarding and increasing assets.

According to Ms. Sunny Hoang - Director for International Residential Sales, Savills Ho Chi Minh City, Vietnam real estate market is becoming more and more potential, when owning a more secured supply of quality construction, more credible investors and more transparent legality, creating peace of mind for foreigners. Especially in district 1, when the city's land fund is becoming more and more limited from the restriction in granting permits for high-rise housing projects to 2020 of Ho Chi Minh City, projects of high-class apartments in this area are always gaining great attention from domestic and foreign customers, investors as well as the customers, who buy with the high expectations of increasing real estate value in the future."

Huong Ly

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