BizLIVE - Tram Nguyen, research manager at Jones Lang LaSalle Vietnam, offered a brief analysis of the Vietnamese real estate market and overseas investors’ interest.
Foreign Realty Investors Consider Vietnam as New Market for Investment: JLL
Tram Nguyen, research manager at Jones Lang LaSalle Vietnam.
With a growing economy and recently changed foreign property investment laws, many experts say now is the right time to invest in Vietnamese real estate. Do you agree and what is your opinion on the opportunities the Vietnamese market offers to foreign property investors?
The year 2015 was a turning point in the real estate market in Vietnam and we expect that to continue throughout 2016. Residential witnessed strong supply and demand dynamics throughout 2016 in all sectors of the market, whether it was affordable, mid-end or high-end, condominium, villa or resort.
One of the biggest success stories of 2015 was the introduction of the new legislation for foreigners to buy in Vietnam. The legislation came at a very opportune time as other markets in the region struggle and an increased focus has been placed on Vietnam. The market is developing and maturing at a faster rate than previously seen. Developers, investors, banks and government authorities are more alert to market dynamics and prudent in their actions and roles.
I will not say whether it is the right time to invest in the Vietnam real estate market because I believe that investment will depend much on the investor’s knowledge and understanding of the market.
However, Vietnam has many opportunities for real estate market development. Some positive changes have taken place to the legal structure surrounding mergers and acquisitions activity, which will lure more foreign developers and investors to the Vietnam market, and to Vietnam’s law allowing foreign buyers to purchase and own residential property.
The rights of foreigners over the property are the same as the rights of the locals – the property can be leased out, sold, inherited and collateralized. In addition, tenure shall be for 50 years and can be renewable for another 50 years, which is comparable to other markets like Indonesia, Thailand and the Philippines.
A safe and stable political situation and economic growth rate are also advantages for the Vietnam market. Therefore, I think that foreign real estate investors would consider and be aware of Vietnam as a new market for investment.
Have you witnessed an increase in foreign investment into Vietnamese real estate since the law that allows foreigners to purchase property in Vietnam came into effect in July last year?
We have witnessed a significant increase in the number of enquiries as well as transactions from foreign buyers.
JLL recently carried out an international marketing campaign on residential projects in Vietnam and received a considerable amount of interest and feedback from investors from Singapore, Hong Kong and Japan.
Some developers in Ho Chi Minh City reported that foreign buyers are aggressively interested in their projects and there are no available units for foreigner buyers due to the limitation of the law on the foreign ownership portion of each development. The total number of foreign buyers has reached more than 1,000 units, versus a few hundred recorded before the new law was introduced.
Some developers in Ho Chi Minh City reported that foreign buyers are aggressively interested in their projects. Photo: Minh Tuan/BizLIVE. 
The cities of Hanoi and Ho Chi Minh City are the focal points of current development. Which real estate sectors would you describe as being most active at the moment, both in terms of investment as well as development?
Foreign investors continue to look for income producing assets or teaming up with good quality JV partners. Local investors primarily concentrate on buying development land.
It is fair to say that all sectors will be considered. However, I suppose the residential and office sectors are the most attractive in terms of investment as well as development in the Ho Chi Minh City and Hanoi market.
Apart from Hanoi and HCM City, what other areas of Vietnam would you describe as having potential, particularly with regards to resort and other tourism related development?
At the moment, there is a strong interest in the resort and hospitality sector and we expect the uptrend to continue over the coming years. The hospitality sector in general in Vietnam is in its infancy compared to other countries in the region; therefore, investors and home buyers can see the potential for strong future growth.
In terms of location, I believe Phu Quoc, Nha Trang and Da Nang are cities with the potential to attract foreign buyers, as they are very popular with international tourists because of their beautiful beaches and the many resorts and hotels along the coastal road.
What are the major challenges the Vietnamese real estate market faces at this point in time and what is your outlook for the market in the short to medium term?
Vietnam has come a long way in the past five to ten years. The general feedback from many investors remains the same. The lack of transparency, bureaucracy, corruption, the lack of an effective legal system, some issues with compensation and land clearance, land title, and dealing with local partners are some common challenges that are faced at this time.
However, there are opportunities to tackle all these issues and we hope the Vietnam investment environment will improve in the near future.
As I mentioned previously, the Vietnam property market will continue the upward trend for the next two to three years in both the supply and demand side in the residential, office and resorts/hospitality segments.
The capital value of the residential segment is expected to increase around 1%-2% per quarter. For the luxury office segment, we expect the average rent will go further, from 5% up to 10% in the next several quarters.