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21 April 2024

Vietnam's real estate set to make a big comeback

Residential buildings in Ho Chi Minh City. Demand for property has picked up in Vietnam due to an expanding urban middle-class. (AFP)

By Agencies

After a bleak past two years for Vietnam's real estate market, industry players are hoping things will start to look up this year.

ECM Libra property analyst Bernard Ching told The Malaysia Star Daily newspaper Vietnam's property market, which used to be quite robust because of foreign demand, has eased up quite substantially. "Since the financial crisis, many foreigners have left the country and foreign demand has dried up. Although fundamentally there is still demand for property, it is not as strong as it used to be since the foreigners left," he said.

Ching pointed out that the property market in Vietnam is more a "long-term play and is very much dependent on the entry cost".

"Companies that have ventured there need to balance the expectations of their shareholders with the realities of the market," he said.

However, optimists believe the closure of all gold trading floors in the country by end-March will lead to a re-channelling of capital flows from gold exchanges to the stock and property markets. "Several trillion dong could flow into stocks by the end of March. Investors will then park their money in real estate," said a consultant.

Another positive factor will be in public infrastructure investments such as the Thu Thiem bridge and the East-West highway in Ho Chi Minh City, which will improve the accessibility of more districts.

SP Setia Bhd president and chief executive officer Tan Sri Liew Kee Sin believes that Vietnam offers some upsides for developers.

"Vietnam's favourable demographics, with a population of 87 million people living mainly in the countryside, presents opportunities for development. Demand for property, including suburban and modern housing, has picked up due to an expanding urban middle-class. Even second-home vacation dwellings are seeing good take-up and this shows the kind of appetite that still prevails in Vietnam," he said.

Liew said the sentiment has improved as the Vietnamese are beginning to pull out of conservative asset classes such as gold. Limited launches by developers during the global crisis have also resulted in a more favourable supply-demand scenario.

Liew said Vietnam is also experiencing a sub-urbanisation trend with cities getting over-populated and the infrastructure unable to accommodate the rapid population growth and associated demands as far as housing is concerned. According to a recent report by CBRE Vietnam, real estate is making a big comeback as there is strong demand.


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