The Vietnamese real estate market revived substantially in 2015 on economic recovery coupled with macroeconomic policy supports, resulting in a sharp rise in inventories and a strong growth in liquidity. This is building up investor confidence as the market enters 2016. The market is forecast to have 60,000 - 80,000 apartment units from new projects in 2016 (upmarket class will account for about 70 per cent). Property prices are estimated to climb 5 - 7 per cent in the year.
Good recovery
2015 marked the return of foreign capital inflows to the property market of Vietnam. Foreign investors boosted M&A deals and capital sharing in property projects during the year. In 2015, the real estate sector came third in FDI value licensed, with 19 new projects and 7 seven existing projects allowed to scale up investment, with a total registered value of US$1.81 billion.
Ms Huong Tran Kieu Dung, CEO of FLC Group, said that the year 2015 marked the rally of the property market, especially in the second half when the market liquidity improved markedly. 2015 was also a banner year for the real estate market when two important laws, the Law on Real Estate Business and the Law on Housing, entered into force. This opened up a new legal space for the market and created a stronger foundation for the market to develop.
Ms Le Hoang Lan Nhu Ngoc, Senior Manager at Research and Consultation Division, CBRE (Vietnam) Co., Ltd, said with a young population, Vietnam now has a very high demand for housing. Foreigners’ housing demands in Vietnam also escalated. So far, a total of 400 deals have been reached by foreign buyers and their purchase requests also rose approximately 30 per cent. Besides, the Government also eased foreign ownership in listed companies to 100 per cent. This move was also expected to create favourable conditions for property firms to draw the fancy of foreign investors.
She analysed that “Selling price in completed projects is now lower than primary price offered by new projects but deals are still very high, indicating a good year ahead.”
According to the Vietnam Real Estate Association (VNREA), Hanoi and Ho Chi Minh City had 3,250 successful transactions in October alone, up 3 per cent from the previous month, bringing total deals in 10 months to 21,150. By the end of October 2015, real estate inventories fell to VND56,286 billion, a decrease of VND72,262 billion or 56.21 per cent from the first quarter of 2013, a drop of VND38,172 billion from December 2013, and a decline of VND3,109 billion from September 20, 2015. Total credit outstanding for real estate is expected at VND350 trillion in 2015.
Ms Dung affirmed that “I believe the real estate market in 2016 will be even more exciting than in 2015.” She cited that the market will get a lot of supports in the year because the economy will grow faster, the market has experienced a long-enough market accumulation period, and the lag period of many important laws will be over. In addition, foreign capital inflow will also give a strong boost.
Remarking on the property market in 2016, Dr Nguyen Tri Hieu, a financial expert, said that the market recovered spectacularly in 2015, driven by the restored investor confidence. In 2016, investors need to build more affordable social houses as GDP per capita of Vietnam is as low as US$2,000. Banks and authorities should continue to launch property lending packages with longer terms to provide easier housing access for low-income people.
Real estate bubble is unlikely
Mr Le Duc Khanh, Director of Investment Strategy at Maritimesbank Securities Joint Stock Company, said real estate companies may be hot picks on the stock market in 2016, particularly industrial zone developers (forecast to benefit from new trade agreements), big contractors like Cotec Construction Joint Stock Company (Coteccons) and Hoa Binh Construction and Real Estate Corporation. These companies have extensive competencies, capital and technologies.
Mr Nguyen Tri Hieu thought that although he is keeping a pessimistic look over the stock market in 2016, he insisted on the recovery of the property market. Real estate will be a hot spot on the stock market in 2016. “As negative factors are still on the horizon, the stock market is unlikely optimistic. What I feel optimistic on the stock market in 2016 are consumer goods, electronics and specially real estate industries,” he noted.
When the real estate market started to recover, the price disparity also widened, showing signs of growing interests for midmarket and upmarket segments in the second half 2015. This raised concerns over the formation of real estate rubble in 2016?
Ms Dung said the real estate market will surge in 2016 but the bubble will be less likely to occur. “The prolonged slump has helped the market to short-list only capable investors and to eradicate speculators. Homebuyers are more alert than before and they will choose potential, creditable investors. Legal documents will also be adjusted to enable the market to develop more stably and sustainably,” she added.
Thus, most specialists share the viewpoint that real estate will be a much more attractive investment channel than other channels in 2016. Each segment has its own pluses and the bubble cannot occur. However, investors are still cautious on this issue.
Luong Tuan
Vietnamese
