Vietnam outperformed its regional peers in 2015 amid a period of relative stagnation and this trend is set to continue in 2016 although some headwinds persist, Savills World Research has said in a recently-released report.
The country’s property market has been buoyed by improvements in macroeconomic conditions and legal reforms, the real estate service company said. Below are some snapshots in each of the main sectors:
Residential development - Long-term capital growth
Rapid urbanization, a fall in household occupancy and a young population will continue to underwrite residential property demand in Vietnam through 2016. In the short-term, economic fluctuations represent the main risk, but the growing middle-class demand for new homes represents a long-term trend.
The Amended Housing Law now allows foreign investment in this sector, supporting future growth previously maintained by domestic demand. The landed residential markets in HCM City
and Hanoi enjoyed strong supply and good absorption in 2015.
This asset class also benefits greatly from improvements in infrastructure and new links, drawing the ‘mortgage belt’ closer to the city.
A resort in Phu Quoc, Vietnam's largest island. (Photo: youvivu.com)
Resorts - long-term total returns
Approximately half of the world’s tourists come from China and Russia, and Vietnam’s long coastline and tropical weather are in close proximity to both.
The second generation of hospitality development will leverage initial success by developing second homes and resort accommodation. Throughout 2016 there will be a range of coastal homes available all over Vietnam, from affordable levels to global prestige quality.
Retail - new formats
Retail development has been feverish as foreign and local developers compete in this rapidly changing environment. In 2015, the year-on-year growth in retail sales stood at 9.5%, which was one of the highest rates globally.
Office - high rental growth
Demand in HCMC is picking up significantly, giving way to a shortage of supply over the next few years. The market in Hanoi has some signs of improvement but it is often behind HCMC in the property market cycle.
“Improving economic conditions have led to a rise in the fortunes of Vietnam’s property market, with urbanization, tourism and retail development leading the way. Savills is optimistic about the property market outlook, as we can see the momentum carried into 2016,” Neil MacGregor, managing director of Savills Vietnam
“Foreign developers and investors are showing greater interest in the Vietnam real estate market and we see this trend continuing throughout this year and beyond,” he added.