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May 17, 2016

Vietnam, along with the rest of Southeast Asia, is experiencing its hottest weather in years with temperatures in the Capital Ho Chi Minh City (HCMC), reaching record levels. But it’s not just the thermometer that’s feeling the heat – the country’s real estate markets are also hotting up.

With a significantly improved economic environment over the past 24 months, Vietnam’s GDP growth for this year is forecast to reach 6.8 percent which, if achieved, would make it the second fastest growing economy in the world, behind India. Interest rates are currently eight to nine percent and inflation is tracking under three percent while, registered Foreign Direct Investment reached US$22.8 billion in 2015, 12 percent up on the previous year. What’s more, overseas remittances reached approx. US$13 billion, with an increasing percentage of this figure filtering into real estate,

“With the economy back on track, the property market has gathered momentum over the past 18 months, predominantly focused around the residential sectors in the major cities, such as HCMC and Hanoi,” says Stephen Wyatt, Country Head of JLL Vietnam.

Residential sales in each city recorded all-time highs in the first quarter of this year, reaching approx. 9000 units and 8000 units respectively while a lack of supply and increase in demand is driving Grade A office rents higher and vacancy down to six percent.

The country’s retail market remains a mixed bag with some centres performing well and a number of new international brands looking to enter the market. In the hospitality sector, a jump in international visitors to 3.3 million in the first four months of 2016, has prompted a resurgence with many hotels in CBD locations reporting strong occupancy rates.

Activity within the industrial sector has improved with many companies looking to take advantage of the country’s low labour costs and improving infrastructure. The sector will likely enjoy a further boost when a number of trade agreements take effect, including EU and Trans-Pacific Partnership with Vietnam standing to be one of the largest beneficiaries of the TPP agreement over the next five to 10 years.

“Foreign investors have been circling Vietnam for some time with many groups kicking the tyres and trying to understand how to gain a foothold in the market,” says Wyatt.

“More transactions are now being registered, with Japanese groups leading the way but the question on everyone’s lips is how long will market conditions last? In some respects, the real estate market is like the weather, we are currently experiencing a heat wave, but we know at some stage the rainy season and cooler conditions will come.”

Stephen Wyatt
Country Head, JLL Vietnam

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