We can see that merger and acquisition (M&A) activity across the region has been pretty hectic. The listed market has been particularly active, with over $1 billion in IPOs in the first quarter of 2018. While HoSE has recently taken a breather, there is still a strong pipeline of property listings to come in the near term. Historically there have been very few listed property stocks. While they bring much-needed liquidity for investors, there has been a massive distrust in valuations. Good governance, progressive accounting standards, and a maturing stock market will find broad appeal in listed property stocks for foreign investors.
Overall, property returns in Vietnam are generally higher than in its regional peers. Rental yields across most asset classes are reasonable and with capital gains factored in, total returns are competitively high. With “country risk” rapidly diminishing, foreign capital is heading to Vietnam.
Vietnam is well positioned to leapfrog traditional markets through financial technology (fintech) platforms that could have major benefits for property markets. Without legacy systems and with a young, savvy and ambitious startup culture, the opportunities to embrace technological advancements are strong. The government has a raft of initiatives, decrees and circulars to support this, but the competition from regional peers is immense.
It will be interesting to see the region’s reaction to the QE easing and US Fed interest rate rises off the back of improvements in the US economy. This has the potential to push capital into property. Of greater local interest is the strength of Vietnam’s economy continuing to support demand for, particularly, residential products, which in turn fuels much of the broader economy. Good governance seems continues promoting better and more effective business and foreign trade that will assist the commercial sectors. In this greatest age of domestic travel, hospitality projects will continue to do well.
Dominance of residential market
From 2013 to 2017, Ho Chi Minh City’s apartment market saw an average increase in apartment prices of around 9 per cent per annum. High urbanization rates and infrastructure development in the city contributed strongly to overall improvements. Government policies have also led to a steady supply of apartments and hence a relatively stable market without any significant oversupply.
Strong residential demand will likely continue throughout the remainder of 2018, particularly in the more affordable end of the market, from genuine owner-occupier demand. Strong new supply will come online across all grades and capture demand in all purchaser pools. Apartment prices in the city are generally still lower than regional peers such as Kuala Lumpur and Bangkok, despite much stronger growth rates in the city when compared with these markets. In 2017, Ho Chi Minh City’s high-end apartment prices were around 90 per cent of those in Kuala Lumpur and around 20 per cent of Singapore’s.
The average price across the broader market is expected to continue to increase but at a slower pace, with price increases linked to better development standards and continued strong residential demand driven by urbanization, the rapid growth of the middle class, and new infrastructure- Vietnam Economic Times.
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