The Vietnamese real estate market ranked No. 35 out of 42 frontier and emerging markets with the highest degree of risk in the world.
In a recent “Emerging & Frontier Markets” publication released by Cushman & Wakefield, a property research and management company, Vietnam’s property market came as a wide surprise as it was ranked 35th out of 42 markets with the highest degree of risk in the world. This assessment is based on risks and opportunities for office tenants in the most attractive markets in Africa, the Americas and Asia.
Risks and opportunities
The global economy has shifted as big investors target higher rates of return in frontier and emerging economies. Therefore, the demand for rented offices in these countries is also on the rise. The potential development of property markets in these countries is still huge, but there are many challenges to foreign investors as lack of information transparency, information inconsistency, changeable information and insufficient information about real estate ownership, bureaucracy and corruption pose increased risks to market entry and legal enforcement.
Cushman & Wakefield assessed risks in office purchases in globally interested frontier and emerging markets.
Asia
According to Cushman & Wakefield, despite Southeast Asia being one of the fastest growing regions in the world with the VIPs (Vietnam, Indonesia and the Philippines) performing very well from an overall economic perspective, all three countries have slipped slightly down the rankings with ease of property ownership creating issues in Vietnam and the Philippines, while Indonesia has higher costs for registering property. Despite this, these locations are significant growth markets for a number of industries.
Americas
In the Americas, Uruguay, Argentina and El Salvador have risen considerably, with Mexico just outside the Top 10. A trend of slowing economies following rapid growth and stable rents in the next 12 months is providing opportunities for businesses.
Africa
A growing middle class population, better infrastructure and technological improvements in a number of countries possessing transparent real estate markets has led to Africa securing half of the top 10 most attractive emerging market locations, according to the report.
The 2015 Risk Index results reveal that Botswana retains its position as the most attractive market, with other African states including South Africa, Ghana, Morocco and Tunisia also featuring in the top 10. Meanwhile, it is important to remember the diversity of the African markets, with Angola, the Democratic Republic of Congo, Zimbabwe and Nigeria perceived to carry greater risk.
Richard Middleton, Head of Account Management & Client Services, Global Occupier Services at Europe, Middle East and Africa of Cushman & Wakefield, said: “Due to a number of global economic shocks throughout the past 18 months, risks are rising in certain emerging markets. At times of uncertainty, real estate portfolio strategies come under close review and the Emerging Markets Risk Index helps identify opportunistic locations for occupiers."
"As emerging markets become increasingly integrated into the global economy, it is important to remember the sheer size and diversity of developing economies. Emerging markets are often mistakenly viewed as homogenous; however, in reality real estate dynamics vary considerably as do the sets of risks and opportunities on offer for occupiers across differing geographies and business sectors. Africa is a good example of this, with countries offering very different operational profiles. Real estate strategies need to reflect this.”
Vo Thi Phuong Mai, Head of Business Development at Cushman & Wakefield Vietnam, said, "Vietnam's ranking was a ten place fall against 2014. Both land ownership and allocation in Vietnam are under the government’s control, making it difficult for investors to invest in real estate and stimulate transactions. Besides, investors can feel frustrated by bureaucracy, overlapping procedures, and ever-changing policies.”
The Risk Index considers the threats and opportunities across the globe for businesses targeting real estate from either an expansion or relocation perspective, and provides insights into which markets possess the strongest prospects for occupiers throughout 2016.
While a number of macroeconomic and political global shocks such as fluctuating commodity prices, financial turbulence and policy bottlenecks were created in the BRIC economies of Brazil, Russia, India and China, they are now also carrying implications for emerging markets.
The report also looks at emerging markets from a more micro perspective. Through a survey of “best in class” property operators, local challenges surrounding accessibility of real estate were scored on a country by country basis.
Luong Tuan
Vietnamese
