JUST over 30 years ago allied forces were fighting the supposed spread of communism in Vietnam and the Asian region. Now we are contemplating investing in Vietnam’s burgeoning property market.
Late last week, Jones Lang LaSalle led the attack on the Vietnam property market by opening its office in Ho Chi Minh City.
In its report, “Destination Vietnam – The Final Frontier?” JLL found that Vietnam’s consistent high economic growth and political stability in the last ten years offer unlimited opportunities to foreign investors despite the challenges that the market presents.
With the increase in foreign investment in the country and the improvement of the legal system, it is forecasted that the real estate sector will progress from a state of immaturity to one of sustainable growth and development in the near future.
Managing director of JLL Vietnam Andrew Brown said that the the influx of foreign investment into Vietnam and the improvement in the country’s legislative system make it a viable destination for both corporates and developers.
JLL’s report on Vietnam also highlighted that despite the current optimism, there are notable constraints and obstacles on moving forward.
They relate to what the government needs to address as well as what domestic and foreign investors and occupiers are required to accept as part of the fabric of operating and doing business in Vietnam.
JLL’s senior manager, Consultancy and Research, Buu Le, said that Vietnam’s economic growth, increased living standards, emerging consumer trends, rapid urbanisation, emerging tourism industry and growing foreign investment offer attractive opportunities for foreign and domestic property investors alike. Ho Chi Minh City and Hanoi are Vietnam’s two main metropolitan centres for investments given their attractive population profile and strategic location.
“Vietnam’s real estate market is viewed as promising and opportunistic. Despite this optimism, market challenges exist such as the country’s low administrative efficiency, low transparency, an underdeveloped legal system and its requirements for significant infrastructural improvements. However, Vietnam’s attractiveness to foreign investors remains but they require long-term commitment, deep pockets, flexibility, patience and persistence,” Le added.
Amongst the positives for investment in Vietnam the report found that over the past five years, Vietnam’s GDP growth rate averaged 7.4% per annum, second only to China. The country’s population profile is positive with 70% under the age of 30. Currently, the manufacturing sector is growing at a rate close to 17% per annum and the services sector is moving up strongly, driven by retail and tourism industries growth.
The international ratings agency, Standard & Poor’s has upgraded Vietnam’s financial strength rating.
Brown added that the rating had contributed to Vietnam’s placing on the radar screen of many international real estate market players. Foreign investment into Vietnam reached $US10.2 billion in 2006 (a record high) and is expected to reach $US10-12 billion in 2007.
Brown said that the overall real estate market has a positive and prospective outlook, driven by high economic growth, rising foreign investment and deregulation. Annual overseas remittances, which have been continuously increasing reached $US4 billion in 2005 and $US4.5 billion in 2006, have driven demand for better-quality housing.
“With the foreign investment inflows and tourism rising in anticipation of Vietnam’s accession as the 150th member of the WTO, the demand for offices, shopping centres, hotels and warehouses is growing accordingly. Furthermore, the ratified Real Estate Trading Law which came into effect on 1 January 2007 will free up opportunity to non-resident Vietnamese and foreign property investors.”
Brown added that the above opportunities and the forecast that Vietnam’s real estate sector will move in the direction of sustainable growth and development bode well for the country.
“We are optimistic about Vietnam’s future and confident that given our strong global and regional network as well as the growing number of our clients looking to make their foray into or expand in Vietnam, Jones Lang LaSalle will be able to capitalize on the opportunities in this emerging market.”
Australian Property Journal