Mr. Neil MacGregor, Managing Director of Savills Vietnam, tells VET that the property market will be stronger in 2015 and explains why foreign investors will be interested in the office and residential sectors.
Do you think Vietnam's property market will be brighter in 2015?
Definitely. We believe that the Vietnamese real estate market in 2015 will be even stronger, due to new policy initiatives, lower interest rates, and the recovery of the macro economy. The revisions to the Law on Real Estate Business will help to accelerate the restructuring of the property market, creating conditions that will attract investment from foreigners and Vietnamese alike. The VND30 trillion credit package, with an extended 15-year loan term instead of ten years, promises to be a lever for the affordable housing market. Experts believe that interest rates will be kept low in 2015, representing a good opportunity for local and foreign investors. In addition, the broader economy saw positive signals in late 2014 and early 2015, including higher foreign direct investment (FDI), increased overseas remittances, and solid consumer spending growth.
What sectors will attract interest from foreign investors?
In 2015 we will witness increasing interest from foreign investors in the office and residential sectors. The introduction of the amended Law on Housing allows foreigners to have an enforceable title and we expect this will have a significant impact on the residential segment. The residential sector will also play a major role, as we've already seen dramatically higher absorption rates in both Ho Chi Minh City and Hanoi in 2014. There is also strong demand from foreign investors looking to participate in the office market, particularly those looking to develop high quality Grade A buildings in central locations. This investment will be supported by increases in FDI into Vietnam and the related higher demand for office space in key cities. To a lesser extent the serviced apartment sector is in high demand as more foreigners relocate to Vietnam and we expect the hotel/resort sector to remain active as tourist numbers increase on the back of an improving global economy.
What makes foreign investors confident about the market now?
Foreign investors recognize that Vietnam's property market has reached the bottom of the current cycle and that now is a good time to invest. Yields in Vietnam are attractive when compared with the region and are set to improve further as the market recovers. Vietnam is also set to benefit from increasing global interest in Southeast Asia in general as the ASEAN free trade agreements come into effect. Other trade agreements such as the Trans-Pacific Partnership Agreement (TPP) and the Regional Comprehensive Economic Partnership Agreement (RCEP) are expected to lever the economy and provide great opportunities for the real estate market.
Additionally, the real estate market is being supported by legal regulations such as the amended Law on Enterprises, the Law on Housing, the Law on Investment, and the Law on Real Estate Business.
How will the recent change allowing foreigners to buy houses in Vietnam affect the market?
The new regulation on house ownership for foreigners will allow 50-year renewable leasehold title for foreign buyers. It will also allow foreigners to lease their properties, opening up the market to individual investors. These amendments make the real estate market more competitive relative to other regional countries such as Thailand and Indonesia. Developers will be able to sell up to 30 per cent of apartment units in a given project to foreigners and up to 250 landed properties can be sold to foreigners in each ward. We believe these changes will open the market to a much deeper purchaser pool, improving liquidity in the residential property market.
What are the challenges facing property investors in 2015?
In 2015 residential property developers will need to focus on products and services that meet the demands of their target market, such as unit type, unit size, pricing, design, and facilities. The competition between developers is set to increase, which will be good for individual unit buyers but will prove a challenge to all but the most experienced developers. It will continue to be challenging for investors and developers to secure good quality projects, as available land remains scarce and projects often have many legal issues to overcome. Savills looks forward to assisting developers and investors to overcome these challenges and helping them to take advantage of the improving market.