After a few years in the doldrums, Vietnam's property sector is rising phoenix-like out of a deep valley,
Vietnamese real estate has been a strong draw recently for foreign investors, attracting USD2.32 billion, ranking third among sectors that attract foreign direct investment (FDI). Credit growth has also been on the rise, up 17.2 percent in 2015, while bank lending rose 18 percent in the past year.
It is a pretty rosy picture, and further evidence that the Vietnamese real estate market is rising phoenix-like out of a deep valley. A rapidly inflated bubble from 2005-07 was punctured by the global economic downturn in 2008, a massive credit crunch and huge inflation.
"The key aspect is that we are coming out of the bottom of our real estate market cycle," says Neil MacGregor, managing director of Savills Vietnam. "We are in a recovery phase. So it's an exciting period."
Along with an influx of FDI and foreigners coming to work and live in the country, Vietnam's growing middle class is also driving demand. Vietnamese have traditionally focused on gold, dollars, and land as ways of stashing money. But while the last boom was driven by speculation mania, buying with cash and flipping properties, this cycle is seeing a much stronger proportion of owner-occupiers or buy-to-lease owners.
"On some projects up to 50 percent of transactions now involve some form of mortgage," adds MacGregor. "The fact that we're seeing more mortgages is a result of there being more owner-occupier purchases."
Many of the current and future developments are clearly intended to appeal not just as investment opportunities, but as places to live, offering lifestyle amenities and facilities such as healthcare and services for the aged. Both Ho Chi Minh City and Hanoi are cities that lack public green spaces and recreation opportunities, and in many ways the residential market is vying to fill in that gap.
"Homebuyers are becoming more discerning and are on the lookout for quality properties with strong value offerings in prime and upcoming locations developed by reputable developers," says Linson Lim, president of Keppel Land Vietnam.
Pipelined projects with strong lifestyle components include Saigon Sports City, an activity focused project in Ho Chi Minh's District 2 developed by Keppel Land, Vinhomes Golden River, a full mixed-use development with a school system, hospital, supermarkets and boutiques located on the Saigon River and, in Hanoi, Green Pearl, another sophisticated green oasis.
Outside of Vietnam's two main cities, a major production boom is also happening on second, or holiday homes, with resort-style residences springing up in locations such as Danang, Hoi An, Nha Trang, Cam Ranh, Ho Tram and Phu Quoc.
Second Home Sweet Home
Residential property growth isn't just concentrated in Vietnam's biggest cities. The second-home market has been expanding rapidly as well, in many cases driven in conjunction with resort development. Beachfront and coastal areas are showing large growth in sales, especially in the very recent months.
According to CBRE Vietnam, Nha Trang has seen sales of 1,387 units in Q1 2016, up from 481 units in all of 2015. Danang's second home market has boomed to 1,335 units sold in Q1 2016, up from 185 last year. Phu Quoc has gone from a sleepy tropical island to massive development destination, with massive resort, safari, and hotel projects transforming the landscape.
Some high-end mixed-use residential properties around Vietnam include Naman Residences between Hoi An and Danang, The Point in Danang, The Residences Mia Nha Trang and The Hamptons Ho Tram.
By Thomas Maresca
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