<p><img alt="" src="/documents/10204/0/vietnam-investment-feature-2018-compressor.jpg/416a3568-35a2-47b2-bcfd-1951e4cfa2a7?t=1539317666807" style="width: 1400px; height: 640px;" />Anyone familiar with Vietnam can attest to the city’s almost dreamlike transformation. Leave for a year, a couple of months, even a few weeks—and you’ll return to a place at once familiar and dramatically different.</p> <p>Vietnam’s two major cities, Hanoi and Ho Chi Minh City are undergoing whirlwind physical changes—but a seemingly existential shift is happening. A threshold feels like it’s being crossed, a corner being turned, especially in HCMC, which is transitioning from a kind of overgrown mega-village into an international urban centre.</p> <p>The real estate market is very much a part of this overall transformation, evolving from the speculation-driven boom-and-bust cycle of the mid-2000s into a more diversified and stable environment.&nbsp;</p> <p>From foreign investors snapping up luxury properties to young professional couples taking out a mortgage on their first condos, the times have been good indeed. More importantly, there’s an air of sustainability this time around.</p> <p>“Things are going extremely well,” said Neil MacGregor, managing director of Savills Vietnam. “If you’re a property developer or a residential purchaser who’s got into the market, you would have seen your investments perform very well over the last two to three years.”</p> <p>MacGregor said that as volume of sales continue to increase year-on-year, the growth has been spread across all segments and with a base of both domestic and foreign buyers, the latter allowed to purchase property in Vietnam since July 2015 when a policy change went into effect.&nbsp;&nbsp;</p> <div class="pull-quotes-container">Things are going extremely well. If you’re a property developer or a residential purchaser who’s got into the market, you would have seen your investments perform very well over the last two to three years</div> <p>As a sign of the market’s robustness, recent development has been dominated by the affordable and mid-end sector.</p> <p>“The middle class in Vietnam is growing very rapidly,” MacGregor noted, “and with that comes increasing demand for owner-occupation in the affordable segment, which has really limitless demand at this stage. Everything that is built is essentially absorbed.” Savills categorizes the affordable segment as units up to USD900 per square meter.</p> <p>While sales growth is strong, the number of units launched in HCMC actually went down 19 percent year-on-year in 2017. There was a total of 31,000 units launched, according to CBRE Vietnam, of which the mid-end segment accounted for 64 percent—a 14 percent increase year-on-year. Meanwhile, high-end units made up 21 percent of the supply, a decrease of 10 percent year-on-year, with only one luxury project launched in 2017. CBRE defines high-end as between USD1,500 and USD3,500 per square meter, and luxury above USD3,500.</p> <p>This focus on the lower-end segments gives the market more balance, agreed Hang Dang, managing director of CBRE Vietnam. “The market is more stable now,” she said, “with developers becoming more cautious and careful with new projects. The absorption rate is good and there’s a wider range of products.”</p> <p>Jones Lang LaSalle’s country head, Stephen Wyatt, said the market was being driven by some key demographic trends, especially a high urbanization rate that has averaged around three percent annually, thus increasing rental demands.</p> <p>“There is still an element of investment speculation but at the root end, users are moving into these properties, which is positive,” he said. “The other part that we’ve seen is actually more Vietnamese renting than before, which is a different dynamic to the market.”</p> <p>Even as product launches went down last year, demand remained high—2017 was the first time&nbsp;in five years&nbsp;that sales outpaced products launched in HCMC, with total number of sold units estimated at 32,905 by CBRE, a decrease of five percent year-on-year.</p> <p><img alt="A billboard for a luxury project in Ho Chi Minh City, Vietnam. hanohiki/Shutterstock" src="/documents/10204/0/vietnam-investment-feature-2-compressor.jpg/390a286b-1a7c-4f52-8e49-a323d2ed572f?t=1539322297804" /></p> <p>In Hanoi, which CBRE’s Dang said generally is on a market cycle one or two years behind HCMC, there were 35,000 units launched and 23,000 sold in 2017.</p> <p>Market maturity is even reflected in the marketing of product launches. Lately, instead of the blaring techno and scantily clad promotion girls of yore, there’s been an increasing focus on promoting practical matters like building safety—particularly in light of an HCMC apartment building fire last March that left 13 people dead.</p> <p>Mid-end and affordable units may have accounted for the bulk of recent activity, but by no means is the high-end or luxury market being left behind.</p> <p>Brokers report sales rates are hitting 90 to 100 percent in high-quality products in prime locations, such as Empire City Thu Thiem (by Keppel Land) and d’Edge Thao Dien (CapitaLand). Prices have seen positive growth, but not to overheated levels. CBRE found the high-end segment recording a year-on-year increase of four percent in selling price in 4Q2017, and is projecting the high-end and luxury segment to show an increase of five percent in 2018, compared to 1.5 percent for the mid-end segment.</p> <p><a href="http://property-report.com/detail/-/blogs/6-most-unmissable-places-to-live-it-up-in-central-vietn-5" target="_blank"><strong>More:&nbsp;6 unmissable places to live it up in central Vietnam</strong></a></p> <p>Foreign buyers—mainly coming from regional powerhouses of Japan, Korea, Singapore, Hong Kong and increasingly China—are concentrating on the luxury and high-end segments of the market, which are still priced far below comparable products in their home countries. Current regulations allow foreign buyers to purchase up to 30 percent of units in a condominium property.</p> <p>In 2017, the total proportion of buyers for units CBRE sold was split almost 50-50 between foreign and local buyers. Interest is off the charts, affirmed Hang Dang. “Our offices in markets from Hong Kong to Shanghai are now asking us to sell projects in Vietnam because they have so many interested clients.”</p> <p>Savills’ MacGregor also noted that high foreign demand is driving a secondary sales market for some projects. “For better projects that are attractive to foreign buyers we’re seeing that 30 percent allocation very quickly absorbed,” MacGregor said, “to the extent that a foreign buyer who had purchased part of that allocation is able to sell at a premium over what the locals are selling their own apartments at.”</p> <p><img alt="Hanoi, the capital, may be well known for its tranquil lakes and historic architecture but it is building new developments that are drastically altering the flavour of the city" src="/documents/10204/0/vietnam-investment-feature-3-compressor.jpg/b8e1bd5d-86b9-4a46-8b80-4237bd9e2625?t=1539322472384" /></p> <p>MacGregor noted that foreign investors are not only chasing capital growth but seeing good rental yields between six- and eight percent at the mid- to high-end.</p> <p>The quality of coming luxury projects are also reaching new heights. The segment was driven traditionally by foreign developers such as Keppel Land, CapitaLand and Hongkong Land, but such local developers as SonKim Land, Vinhomes and Novaland have aggressively entered the high-end market, either on their own or in partnerships with foreign firms.</p> <p>SonKim Land’s Serenity Sky Villas, for example, will be one of HCMC’s most luxurious offerings. The project in central District 3 features 45 villa-style apartments with double-height ceilings and Vietnam’s first on-balcony private gardens and swimming pools. It is scheduled to come online in 4Q 2018.</p> <p><a href="http://property-report.com/detail/-/blogs/vietnam-draws-global-accolades-for-innovative-community-developmen-3" target="_blank"><strong>More:&nbsp;Vietnam draws global accolades for innovative community developments</strong></a></p> <p>Meanwhile, multiple sources have cited an as-yet-unnamed foreign-invested project slated to launch in HCMC’s CBD in 2018 that will reach a new plateau in the luxury segment, with rumoured prices reaching USD7,000 to USD8,000 per square meter.</p> <p>Helping to give a sound foundation to the thriving space is Vietnam’s strong economy, among the most robust in Asia. GDP growth in 2017 was 6.8 percent, driven by strong domestic demand, record export earnings and continuing economic reforms.</p> <p>This year started out with a bang, with first-quarter growth rate at 7.38 percent compared to the same period in 2017—the highest mark over the past decade. An upbeat forecast by the Asian Development Bank predicted Vietnam’s GDP growth would hit 7.1 percent for the year.</p> <p>Total registered foreign direct investment grew 44 percent in 2017, hitting a record high of almost USD36 billion, with the real estate sector receiving USD3.05 billion.</p> <p><img alt="With its beautiful beach, golf courses and portfolio of luxury developments, Danang is one of Asia's most dynamic second home destinations" src="/documents/10204/0/vietnam-investment-feature-4-compressor.jpg/dfd4abe8-2dcc-4ec7-8297-0cebf32cec65?t=1539322562362" /></p> <p>It’s no surprise that HCMC and Hanoi ranked near the top of Jones Lang LaSalle’s (JLL) City Momentum Index for 2018, ranking third and sixth, respectively. The report noted both cities’ increasing integration into global supply chains for high-tech manufacturing and some of the world’s strongest growth in retail sales and air passenger numbers.</p> <p>Infrastructure growth is setting the stage for the emergence of one of HCMC’s most long-awaited developments, the urban mixed-use project in Thu Thiem, directly across the Saigon River from downtown District 1.</p> <p>In other regions of the country, infrastructure and other economic development are helping to spur major tourism growth in regions such as the Central Coast around Da Nang and Hoi An, and on Phu Quoc island. International arrivals to Da Nang rose 38 percent, and 72 percent in Phu Quoc in 2017. There is booming resort and hotel development in both regions, as well as fast-growing second-home markets for both locals and foreigners.</p> <p>Overall, there seems to be quite a bit of ceiling left for Vietnam’s growth in the near term.</p> <p><a href="http://property-report.com/detail/-/blogs/propertyguru-vietnam-property-awards-2018-winners-unveiled-amidst-unprecedented-market-grow-3" target="_blank"><strong>More:&nbsp;PropertyGuru Vietnam Property Awards 2018 held amidst unprecedented market growth</strong></a></p> <p>“We’re two to three years into the upturn in the market cycle,” said Savills' MacGregor. “By historical standards, we would anticipate [the upturn to last] another two to three years.”</p> <p>And yet, there’s a downside to Vietnam’s incredible growth. Once vaunted for their charm, Hanoi and Ho Chi Minh City are increasingly mired in a cacophony of noise, construction, chaos, traffic and pollution as massive new condominiums are depositing tens of thousands of new residents into urban quarters not equipped to accommodate them.</p> <p>“It’s moving so quickly,” agreed JLL’s Wyatt. “There are a lot of ingredients that sometimes give the feeling we might have another Bangkok or Jakarta on our hands before too long.”</p> <p>Yet while change — both positive and negative — is inevitable, there’s no denying the bullish current nature of the market. Vietnam itself, with its unshakeable sense of national pride and identity, is likely to retain its innate character, but the dreamlike transformation of its cities is sure to continue.</p> <p><em>This article originally appeared in <a href="https://www.magzter.com/TH/PropertyGuru-International-(Thailand)-Co.,Ltd/Property-Report/Business/295140" target="_blank">Issue No. 148 of PropertyGuru Property Report Magazine</a></em></p>

<p><img alt="The Manila skyline. Image: KieferPix/Shutterstock" src="/documents/10204/0/shutterstock_241326595-compressor+%281%29.jpg/a1e39a99-18f4-4999-8131-00789617a8b3?t=1536899783617" style="width: 1440px; height: 744px;" /></p> <p>Donald Trump was on typically succinct form on a recent visit to the Philippines when he called the country a “most prime piece of real estate.”</p> <p>The US president was referring to the nation’s strategic importance as a military ally in southeast Asia. However, he could just as easily have been talking about the property sector in the archipelago – which is benefitting from lavish infrastructure spending, stable growth and interest from foreign investors. &nbsp;</p> <p>The market is also encountering a different kind of cycle at home: one more contingent on the owner-occupier instead of the casual investor, with analysts stating that the current property boom is based on real demand rather than the vagaries of speculation.&nbsp;&nbsp;</p> <p>Any talk of residential real estate in the Philippines requires mention of impressive recent economic stats. In 2017, the country posted a full-year GDP growth of 6.7 percent, among the fastest rates in southeast Asia. Consumer spending, which represents 70 percent of economic activity, is experiencing record year-on-year growth of 6.1 percent.</p> <p>“The Philippines continues to be one of APAC’s leaders in economic growth, backed by robust consumer spending from the young demographic,” says Sigrid Zialcita, managing director for research at Cushman &amp; Wakefield Asia-Pacific.</p> <p>“Moreover, the current administration is boosting government spending, stressing the importance of infrastructure spending,” she adds, referring to President Rodrigo Duterte’s programme – known as his Build, Build, Build policy – which is jacking up infrastructure outlay to PHP8.44 trillion (USD168 billion).</p> <p><a href="http://www.property-report.com/detail/-/blogs/how-do-you-solve-a-problem-like-manila-traffi-4"><strong>More: How do you solve a problem like Manila (traffic)&nbsp;</strong></a></p> <p>Homes in the luxury segment posted the highest average annual pricing growth in 2017, rising 28 percent to reach PHP350,000 per square metre in Metro Manila’s various CBDs, according to real estate consultancy Santos Knight Frank. Meanwhile, the take-up of pre-sold condominium units in the metropolis increased 24 percent to 52,600 units, the highest figure ever recorded by Colliers.</p> <p>Overseas Filipino workers (OFW), one of the nation’s traditional markets for housing investments, sent a record USD28.1 billion in remittances last year. Foreign direct investments (FDI) also soared to a record-breaking USD2.017 billion in October, as investors from Singapore, Hong Kong, China, Luxembourg, and the US pledged to pour capital anew into the country.</p> <p><img alt="Metro Manila has long been characterised as a disjointed hodgepodge of island suburbs, but President Duterte's ambitious building programme looks set to add more cohesion " src="/documents/10204/0/shutterstock_439023277-compressor.jpg/17821c16-038a-4ea1-981f-6b5b78318381?t=1536898686851" style="height: 301px; width: 1000px;" /></p> <p>The government has pencilled economic reforms that analysts perceive to be catalysts for a further influx of foreign capital. These include a planned reduction of the minimum paid-up capital requirement for foreign retailers to establish a presence in the country; the removal of restrictions against 100-percent foreign-owned investment houses; and the easing of prohibitions on foreign contractors participating in property projects.</p> <p>So far so promising, it must be said. However, the Philippines has long had a reputation for being on the chaotic side. And still overtones of anarchy threaten its veneer of newfound stability. Credit watchers Moody's and Standard and Poor's flagged the country for political risk in 2016 as President Duterte declared a bloody war on drug traffickers that has taken at least 12,000 lives to date.&nbsp;</p> <p>The siege of the southern city of Marawi by ISIS-linked terrorists last year and Duterte’s subsequent declaration of martial law also spooked international locators. Office take-up by BPOs in Metro Manila plummeted 26 percent to 385,000 sqm last year as a result, data from Leechiu Property Consultants shows.</p> <p><a href="http://www.property-report.com/detail/-/blogs/this-filipino-company-just-secured-a-mega-deal-to-build-luxury-californian-vill-3"><strong>More:&nbsp;This Filipino company just secured a mega deal to build luxury Californian villas&nbsp;&nbsp;</strong></a></p> <p>The drama has not yet turned into a full-blown crisis though – at least when it comes to international perceptions of Duterte’s distinctive brand of tough love.&nbsp; In December Fitch upgraded the country’s sovereign credit rating with the admission that there is “no evidence so far” that the war against the illegal drug trade has undermined investor confidence.</p> <p>“Despite the political risks, it’s still business as usual given the attractiveness of the Philippines as an investment hub within Asia-Pacific,” says Zialcita.</p> <p>Duterte has charted an unprecedented path in diplomatic allegiances, vacillating from affinity with the Trump presidency to strategic dalliances with China, the Philippines’ territorial rival over vast tracts of real estate in the South China Sea. On his watch, the Philippines became a signatory of the One Belt, One Road (OBOR) Initiative, China’s sweeping global construction spending spree.</p> <div class="pull-quotes-container">With a gross rental yield of better than 6 percent, the Philippines outperforms cities in China and almost anywhere else in Asia except Indonesia</div> <p>Chinese buyer inquiries in the Philippines in fact surged 246.4 percent in the fourth quarter of 2017 from the same period a year earlier, according to Chinese property portal Juwai.com.</p> <p>“[Chinese investors] believe their investments are sanctioned by the Chinese government, which favours OBOR-related countries,” says Juwai.com CEO Carrie Law. “They also believe that the massive development projects and growing commercial ties will lead to price growth in the Philippines that will reward any property acquisitions made in the near term.</p> <p>“Partly this is driven by returns. With a gross rental yield of better than 6 percent, the Philippines outperforms cities in China and almost anywhere else in Asia except Indonesia,” she adds.</p> <p>Indeed, when it comes to rental yields the nation’s capital outshines Bangkok (4 percent), Singapore (2.9 percent) and Shanghai (2 percent). “Manila today is the Hong Kong and Singapore of 30 years ago,” says Santos Knight Frank CEO Rick Santos.</p> <p><a href="http://www.property-report.com/detail/-/blogs/how-love-of-surfing-inspired-a-filipino-entrepreneur-to-create-this-private-paradi-7"><strong>More:&nbsp;How a love of surfing inspired a Filipino entrepreneur to create this private paradise&nbsp;</strong></a></p> <p>Another factor that is set to provide a boost to the property sector both directly and indirectly – given the financial bonanza it will hand Duterte’s infrastructure programme – is the Tax Reform for Acceleration and Inclusion (TRAIN) Law, the most comprehensive reform to the country’s tax regime in 20 years. Among other show-stopping provisions, the law exempts those earning below PHP250,000 a year from paying personal income taxes and higher-value properties from estate taxes.</p> <p>“The law may boost rental demand due to the higher purchase power from decreased personal income taxes, coupled with the increased threshold for value added tax (VAT) exemption for housing lease transactions from PHP12,800 to PHP15,000,” says Zialcita. “This in turn may encourage investors to purchase more properties in anticipation of a stronger rental demand.”</p> <p>TRAIN does remove VAT exemptions from residential properties costing between PHP2.5 million and 3.2 million, which could lead to higher contract prices for homes. That said, TRAIN primes real estate investors for longer-term bonanzas. Implementation of the law is estimated to net the government close to PHP90 billion in additional revenues this year, around 70 percent of which will be allocated to Build, Build, Build.</p> <p>“These infrastructure projects should unlock land values in the countryside,” says Joey Roi Bondoc, research manager at Colliers International in the Philippines.&nbsp; “Coupled with decentralisation, this ramp-up of public infrastructure outlay should open opportunities for firms engaged in construction, and operation and maintenance (O&amp;M) of key transport infrastructure.”</p> <p>Such a “golden age of infrastructure,” as Bondoc calls it, will compel developers to pursue more integrated urban township projects in provinces near Metro Manila such as Cavite, Laguna, Bulacan, and Pampanga, where road networks are aggressively expanding.</p> <p><img alt="Jepneys and other vehicles currently pack the clogged streets in Filipino cities, but major infrastructural changes are afoot in the nation " src="/documents/10204/0/shutterstock_621925394.jpg/fa9aad48-a3a1-4726-bfbf-8df56045fbc1?t=1536899917751" /></p> <p>Duterte appears to be as committed to upgrading Metro Manila’s infrastructure as decentralising wealth from the capital. The government has unveiled plans to expedite construction of Metro Manila’s first underground rapid transit system as well as complete the Bonifacio Global City-Ortigas Center Link Road and C-5/Katipunan Viaduct projects.</p> <p>With their live-work-play-shop components, integrated urban townships have become even more attractive bubbles of calm to property seekers. Development giant Megaworld, a pioneer in the construction of townships and cyberparks in the late 1990s, expects a great knock-on effect from the recent raft of government programmes.</p> <p>“With the tax reform programme in place and consumer spending on the rise, we see more people investing and buying residential properties this year,” says Megaworld International senior vice president Marivic Acosta.</p> <p><a href="http://www.property-report.com/detail/-/blogs/award-winning-cebu-developments-put-the-region-on-the-real-estate-forefro-7"><strong>More:&nbsp;Award-winning Cebu developments put the region on the real estate forefront&nbsp;</strong></a></p> <p>“The growth of the BPO and POGO (Philippine Offshore Gaming Operators) in office leasing will also have a domino effect on the residential market, especially in townships.”</p> <p>The private sector is increasingly chipping in to power the infrastructure drive in the capital. Ayala and construction firm Eton Properties are jointly building a bridge that will link Pasig to Quezon City. Alliance Global Group Inc, Megaworld’s parent company, is using its capex programme to build Skytrain, a two-kilometre monorail, at no cost to the government.&nbsp;</p> <p>Trump pronouncements often struggle to elicit credulity from listeners. But with such sanguine macroeconomic fundamentals, hyperbole around Philippine real estate is starting to suspend disbelief. Whether it’s a finishing touch on a 57-storey Manila skyscraper or a gargantuan Belt and Road agro-industrial estate, property developments in the Philippines are currently well placed to thrive.</p> <p><em style="box-sizing: border-box; font-family: &quot;bentonsans cond&quot;; font-size: 17px;">This article originally appeared in Issue No. 147&nbsp;of&nbsp;<a href="https://www.magzter.com/TH/PropertyGuru-International-(Thailand)-Co.,Ltd/Property-Report/Business/" style="box-sizing: border-box; background-color: transparent; color: rgb(170, 33, 33); text-decoration-line: none;" target="_blank">PropertyGuru Property Report Magazine</a></em></p>