2012 - Time to Invest in Vietnam Real Estate

Whilst the property market has been suffering a hangover from the past two years, there are a number of key indicators that reveal a positive mood on the market. The State Bank of Vietnam (SBV) has cut the ceiling rate for deposits to 12 percent from 13 percent. Inflation has been on a downward trend for some months and is set to stabilize in 2012. The stock market has been one of the world's top performing equity markets so far in 2012. The benchmark index for the main bourse, the Ho Chi Minh City Stock Exchange, has seen growth in excess of 20 per cent so far this year.

 

The real estate market in Hanoi has been quiet due to a lack of credit and continuing difficult economic conditions since 2011. The government has been steadfast in continuing to implement “Resolution 11”, restricting loans to the sector, with the aim of reducing the risk of an overheating property sector. Liquidity in the residential sector has been especially low. Many potential buyers are hesitating or adopting a “wait and see” approach, first due to difficulties accessing finance, and second due to alternative investment mediums offering better returns.

 

 Going forward, the performance of the residential market will be linked to factors such as the inflation rate, the government’s monetary policy and the performance of alternative investment mediums such as domestic stock market. It must be noted, however, that the main drivers of “end user” demand for apartments: population growth, urbanization, increasing incomes and a substandard aging existing stock, continue to provide a bright medium term future for the residential market.

 

The HCMC real estate market was especially quiet in 2011 and Q1/2012, with very few sales in the apartment and landed property markets. New office and retail developments are offering attractive incentives to entice new tenants, therefore decreasing effective rents in the market. Market liquidity has been limited due to loan restrictions to the sector; a drop in confidence in the real estate market as a way of achieving capital gains.

 

Following a tough year in 2011, Knight Frank, independent global residential and commercial property consultancy, is cautiously optimistic about the property market in 2012.

 

Due to a downturn in the market over the past two years, Knight Frank believes there is a huge amount of pent up demand for real estate, in addition, the number of International Investors contacting Knight Frank has risen dramatically over the past 6 months. For these companies Vietnam, alongside China and India, are all on the radar.

 

Investors will have an opportunity to purchase assets in all sectors for prices considerably lower than two years ago, as a large number of developers with deep financial burdens are keen to offload their assets. Therefore, increased activity is anticipated in 2012.

 

Stephen Wyatt, Country Manager for Knight Frank commented, “The difficulty for most investors is timing, predicting the future trend of the market and knowing that they are not buying at the “top” of the cycle. As with any property investment anywhere in the world, the key is location and understanding the market. There is no question that Vietnam still offers huge upside for any investor over the medium to long term. We are seeing strong demand for many of the investments, land and developments sites that we are currently selling. With renewed optimism and a return of confidence, 2012 is the time to start looking at investing in Vietnam.”