Mr. David Blackhall, Managing Director of VinaCapital Real Estate, spoke with VET about issues surrounding the real estate market and what may lie ahead in 2016.
■ There are some concerns about the sustainability of Vietnam’s real estate market in the context of speculation beginning to return and a property bubble perhaps appearing again. What are your thoughts on this?
Oversupply in the condominium market may cause some instability and downward pressure on the rental apartment market after these condominiums are completed and handed over.
Moreover, difficulties in implementing new regulations may also pose a challenge for both developers and buyers.
A sustainable recovery would require developers follow a disciplined strategy concerning their investment horizon and risk management, all the while selecting the right product to meet an ever more discerning domestic buyer.
Medium-term concerns exist on the ability of the market to absorb new supply. However, inventory reductions during 2015 continue to show positive momentum in the real estate market.
Stable economic growth, controlled currency devaluation, and subsidized credit are expected to expand real estate demand.
In addition, developers who survived the period of downturn will have more experience to reconfigure their strategy and product offerings, thereby further stimulating demand.
■ In 2015 the real estate market attracted significant capital flows, including FDI, remittances, and investment from individual investors. How do you think capital flows will be in 2016?
During the first eleven months of 2015 the real estate market ranked third in Vietnam’s total FDI attraction (with 11.5 per cent of total registered FDI). This trend is expected to continue in 2016 due to the following reasons.
Upcoming trade agreements, including the EU-Vietnam Free Trade Agreement (EVFTA) and the TPP will likely attract even more FDI into Vietnam.
Since July 2015 a number of important legal and regulatory laws have come into effect to improve the market situation and will surely encourage foreign investment. Foreign ownership regulations have been relaxed in the new Law Housing, bank guarantees are required under the new Law on Real Estate Business, and the new Laws on Investment and Enterprises clarify the definition of foreign-invested enterprises, facilitate M&A activities, and reduce the number of prohibited and conditional business sectors.
Vietnam’s accelerating GDP growth, along with 25 per cent of its 90 million people being between 10 and 24 years old (a demographic golden age), subdued inflation, falling interest rates, and improving customer sentiment will continue to lift the real estate sector in 2016.
■ What residential real estate segments would VinaCapital Real Estate care to invest in this year?
VinaCapital Real Estate has had success in the past developing high-end residential real estate and resort villas. The majority of VinaLand’s ongoing developments focus on landed properties (landed plots, villa/townhouse/resort), except for two condominium projects - Azura and Ocean Apartment in Da Nang, which are now more than 95 per cent sold.
Based on past success, VinaCapital Real Estate will continue to look at investing in mid-level landed properties with some mixed used properties with a residential focus. We believe these segments have genuine mid to long-term demand that will provide strong performance for VinaCapital’s development projects.