February 2020 – Officehcm

The HCM City property sector has in recent years attracted billions of dollars worth of foreign investment due to its growth potential, real estate consulting companies have said.

A view of the HCM City skyline. The city real estate market is attracting a number of foreign investors. Photo tripsavvy.com

The city was recently named among the top three markets for property investors in the Asia Pacific by the US’ Urban Land Institute and global professional services firm PricewaterhouseCoopers.

Last year it attracted foreign investment of US$8.3 billion, a 39.45 per cent surge from 2018, according to its People’s Committee.

Manufacturing accounted for 40.14 per cent ($3.33 billion) of it followed by real estate sector with 25 per cent ($2 billion).

Last year Phát Đạt Real Estate Development signed an agreement worth $22.5 million with Japan’s Samty Asia Investments Pte. Ltd to develop property projects with a focus on the city.

Singapore’s Keppel Group broke ground last November for Saigon Sports City, a 64ha smart township project in District 2.

Keppel has received licences for 20 other property projects with a total investment of more than $3 billion, most of them in the city.

Phú Đông Real Estate Group Joint Stock Company said it had tied up with three Japanese companies for a joint venture to develop housing projects in the city.

Korea’s SK Group has bought stakes worth $1 billion in giant developer Vingroup, SonKim Land raised $121 million from a group of investors including EXS Capital, ACA Investments and Credit Suisse AG.

Yamaguchi Masakazu, chief representative of Japan’s Creed Group in Việt Nam, said demand for real estate in Việt Nam remained high, especially in the mid-priced segment.

“The demand is expected to continue rising for the next 30 years.”

Magnet for foreign investment

Analysts said the HCM City property market would remain a magnet for foreign investment this year and in the coming years.

Nguyễn Hoàng, director of DKRA Việt Nam’s R&D division, said, “I think real estate will this year continue to be one of the biggest beneficiaries of foreign capital.”

In recent years the sector has consistently ranked second or third in terms of attracting FDI.

Foreign investment would help meet developers’ demand for funds as the Government tightens credit flowing into the property sector, Hoàng said.

Besides, foreign investors would insist on higher standards, which would require Vietnamese property businesses to raise their standards and improve transparency, he added.

Amid a trend of relocating production facilities from China, with Việt Nam becoming one of the favourite options for many corporations, industrial real estate is among the segments to attract foreign investment.

Industrial real estate rents rose significantly in several provinces last year.

HCM City has been one of the beneficiaries of the shift in manufacturing capacity away from China.

But the city property sector has also been hit hard by the difficulty in getting approval for new projects while there is little or no land left for development in the inner city.

Some Vietnamese businesses are now capable of competing with foreign investors in the high-end and luxury segments, but their number is limited to players like Novaland, Vinhomes, SonKim Land, and Refico.

Local businesses have obvious strengths like having lands available and understanding of legal procedures but suffer from weaknesses such as lack of resources, professionalism and transparency.

Source: VNA

The condo market in HCM City is expected to face challenges this year, according to industry experts.

A condo project in HCM City. Experts forecast that the market faces challenges in 2020.-VNS Photo

In the latest reports about market predictions, Le Hoang Chau, chairman of the HCM City Real Estate Association, said that the market would not face a bubble situation, but that it would encounter challenges in the first half of the year.

However, the market is expected to recover in the third quarter, thanks to the support of local authorities in solving difficulties facing real-estate developers, he said.

Chau also predicted that condos priced around VND2 billion each will continue to dominate the housing market in HCM City.

Having the same prediction, Duong Thuy Dung, senior director of CBRE Vietnam, said: “Licensing issues and credit tightening continue to be the main challenges for the condominium market in 2020. Buyers will face difficulty in buying a condo unit, not because they can’t afford them, but rather because they can’t find suitable options. On the other hand, developers are well-positioned to increase profits thanks to the shortage of existing condo projects in the primary market.”

In addition, the remaining issues, including flooding, air pollution and traffic congestion, have had a negative impact on living quality in big cities.

As a result, new township developments in fringe areas that offer full range of facilities and good connectivity will receive high interest from the market.

To meet this demand, developers have planned new township projects in suburban districts and neighbouring provinces. These projects offer fresh living environments for end-users as well as a good options for investors, especially in the context of limited supply in HCM City.

A CBRE report noted that in 2020 licensing issues would continue to pose a hurdle for the market, so about 30,000 units would be added to the market.

Some new projects in fringe districts which are expected to launch are Vinhomes Grand Park in District 9, AIO City in Binh Tan District, West Gate Park in Binh Chanh, PiCity in District 12; and the southern area with subsequent phases of Eco Green Saigon, Sunshine City Saigon and Sunshine Diamond River in District 7.

Primary prices will continue to increase due to a lack of supply. The luxury segment is expected to have a price increase of 10 per cent year-on-year.

Prices for high-end and mid-end segments will increase 5 per cent year-on-year, due to new supply and high price levels in 2019. The affordable segment will have a modest growth of 2 per cent year on year.

The secondary market will be more active due to a lack of supply in the primary market and new pricing levels across the market.

End-users may find limited options in the primary market and may turn to the secondary market which offers both completed projects and those with good construction progress, the company said.

JLL predicts that about 30,000-35,000 units are expected to launch officially in 2020, mainly from the Vinhomes Grand Park project.

“It should be noted that the number is subject to a great deal of uncertainty given the government’s tight control in granting land-use rights and construction licences. Strong demand is set to carry on and will boost the price further across all sectors.

“However, the demand in the high-end segment, especially from investors, is likely to slow down in the long term as their already-high price level and low rental yield make it a less attractive investment,” the company said.

Source: VNA

HCM City property market a magnet for foreign investors