Investor interest in Vietnam’s real estate market is on the rise, but many who remember the Asian financial crisis remain cautious.
Marc Townsend, managing director of the CB Richard Ellis Vietnam (CBRE), said turnout at a recent seminar organized by law firm Johnson Stocks & Master was good, with institutional investors and fund managers who have looked at China and Singapore and are again showing interest in Vietnam.
Vietnam was once one of the fastest growing economies in the world, luring strong foreign investment in the real estate sector. However, investor interest started to reduce in the late 1990s due to bureaucracy, economic anomalies and draconian laws.
Townsend said that market was showing signs of recovery and recent changes in government policy were paving the way for investors to more easily access or withdraw from the country’s real estate market.
“Investors are very interested in grade A office buildings,” said Townsend. “Others want to look at hotels and resorts in Hanoi and Ho Chi Minh City (HCM City) as well as in Danang, Nha Trang, and Phan Thiet.”
The supply of grade A office space in Hanoi and HCM City remains tight and vacancy rates remain low, at less than 1 per cent in grade A and 2 per cent in Grade B. Grade A office space rents for as high as US$35 per square meter per month, reflecting a slight increase in demand under tiny supply.
Hotels in HCM City are performing well, with annual average occupancy of 77 per cent for five-star, 81.3 per cent for four-start and 82 per cent for three-star properties, according to CBRE. Room rates of four and five-star hotels start at US$60 and US$70 respectively.
Townsend said there is plenty of room for developing shopping centers, as personal income disposal is rising, the economy is growing fast and more international retailers are coming in. As supply is limited, rents will continue to rise.
In the residential sector, he said, the outlook is strong for well-planned, integrated projects and there is growing demand from local and overseas buyers.
Although a lot of investors are scouring Hanoi and HCM City for deals, Townsend said it would take time for them to understand the market.
“This is the golden opportunity for foreign investors to join the market,” said Vu Quang Hien, managing director of CitiPlus consulting company.
Hien said the legal framework for the Common Investment Law and the Housing Law was clear for real estate development. Most local developers were facing a hard time as banks tighten property lending and they were looking for foreign cash and expertise.
However, difficulties for foreign developers to enter the market still remain. Although the Real Estate Trading Law allows developers to transfer projects to other investors, foreign investors are still finding it hard to buy out local projects due to the lack of guidance.
VIR
Vietnamese
