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HCMC property market in good shape

Released at: 20:02, 13/08/2015

HCMC property market in good shape

Ms. Do Thi Loan, Vice Chairman of the Ho Chi Minh City Real Estate Association (HoREA), tells VET about the city's real estate market and the potential for M&As.

by Hung Nguyen - Phan Duong

How would you assess the performance of Ho Chi Minh City’s real estate market this year?

From the second half of 2015 to 2017 the supply of apartments in Ho Chi Minh City is expected to increase strongly, with 59,200 units from 90 existing projects and future projects making the market increasingly competitive.

The real estate market in the city has continued to recover and develop this year. The small and medium-sized apartment segment, with one or two bedrooms priced at around VND1 billion ($45,000), will lead the market due to stable development, huge demand, and high liquidity.

Many say that the requirement to have a bank guarantee on future built projects will push up prices and reduce the supply of affordable housing. What are your thoughts on this?

To ease any price increases caused by the necessity to have a bank guarantee, members of HoREA recommend the following.

For projects whose customers do not require the investor provide a guarantee, the investor need not need provide guarantees for the entire project. Members of HoREA suggest that investors only provide guarantees on apartment within projects that are going to be sold.

The State Bank of Vietnam (SBV) has directed that commercial banks provide credit to both project investors and customers. These banks can also provide guarantees, and are therefore able to monitor financial flows and reduce risk.

HoREA suggests the SBV provide commercial banks with a range on the amount of the guarantee for future built project in addition to a range on credit provision, as contained in the Law of Financial Institutions.

We also suggest the Standing Committee of the National Assembly allow joint ventures, fully foreign-owned and foreign bank branches to provide guarantees for future built projects.

The government is also conducting a pilot project involving capable insurance companies providing guarantees, to increase the protection of purchasers’ rights.

Many foreign investors have expressed an interest in Ho Chi Minh City’s real estate market. What factors do you think make it attractive?

Ho Chi Minh City is central to Vietnam’s economy, with significant increases in the population driving up housing demand. The city also focuses a great deal of resources on developing infrastructure. Moreover, the city’s people’s committee is attempting to reform administrative procedures, to attract investment.

The amended Law on Housing and the Law on Real Estate Business have relaxed many procedures, and their provisions on permitting foreigners to buy property in Vietnam are also factors encouraging investors to invest in the city’s real estate market.

Will there be more merger and acquisition (M&A) activities?

The number of M&A activities in the real estate market has risen strongly in recent times and many investors short on financial capacity have transferred their projects. The market is improving and the demand for housing is still increasing.

Foreign investors fully understand the situation and recognize the potential of the city’s real estate market, and so have invested in certain projects via M&As.

There are 1,407 real estate projects currently licensed in the city, of which 689 have ceased and 85 projects have had their licenses revoked. These represent a potential source of projects for those looking at M&As.

Foreign investors tend to mostly be interested in the luxury segment. Is it possible to attract them to the affordable segment and social housing?

The supply of housing is distributed among many segments in many locations in Ho Chi Minh City and to meet the various demands of customers many investors have reorganized their products.

For new projects the segment very much depends on the location.

Customers have a range of choice in terms of products and pricing that are suitable with their financial capacity, as many projects are now underway.

There is no concern that foreign investors only focusing on the luxury segment has an affect on supply in the affordable segment and social housing.

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