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Steady recovery for real estate market in 2015

Released at: 16:46, 12/01/2015

Steady recovery for real estate market in 2015

New laws and regulations together with economic stability will back market recovery this year.

by Hoang Thu

2014 saw many positive movements in Vietnam’s economy and its real estate market, promising a brighter outlook for 2015. According to CBRE’s forecast for this year the residential market will continue to be positive. Sales momentum is expected to remain at its current strong pace in both Hanoi and Ho Chi Minh City.

New launches are expected to continue at a solid rate in both cities, especially in locations with improving infrastructure (Districts 2, 9, Thu Duc and Binh Thanh in Ho Chi Minh City, and districts in the west and southeast of Hanoi). Luxury and high-end products will be much sought-after, especially in Hanoi, as the stock in these segments is diminishing gradually. The active involvement of both owner-occupiers and investors, including speculators, should translate into increased sales volumes.

While amendments to laws regarding foreign ownership in residential housing is expected to stimulate demand, activities on this front will be slow in the near term as market players take time to assess any market movement.

Regarding the office market, rents in established and mature office buildings is expected to be stable or even increase slightly in Ho Chi Minh City. “Newly completed buildings, however, will need to offer competitive rental rates to attract occupiers,” said Mr. Marc Townsend, Managing Director of CBRE Vietnam. For Hanoi, office space in the west of the city will continue to be under pressure due to oversupply. Occupancy rates are expected to increase thanks to economic recovery, with optimistic projections regarding GDP and foreign direct investment.

Meanwhile, the retail market is forecast to see a mix of positive and negative news in the two cities. In Ho Chi Minh City, limited availability in core areas continues to support average CBD rents, while average non-CBD rents are expected to recover with increasing occupancy.

According to the forecast, closures of under-performing retail centers are anticipated in both cities. Expansion and new entrants are expected to drive the retail market in 2015 thanks to changes in regulations allowing foreign retailers to establish 100 per cent foreign-owned entities in Vietnam, which is within the framework of the country’s commitments under the WTO. However, the Economic Needs Test (ENT) will remain a barrier to foreign retailers. Restarted projects and the construction of future supply will speed up, in line with economic recovery.

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