Strong residential demand likely continues throughout the rest of 2018: Savills

By Ngoc Anh - Jul 04, 2018 | 08:12 AM GMT+7

TheLEADERIt has been a very healthy start for Vietnam to 2018 with solid performance across all asset classes, especially with good macro-economy and strong foreign direct investment growth, based on the viewpoint of Troy Griffiths, Deputy Managing Director of Savills Vietnam.

Strong residential demand likely continues throughout the rest of 2018: Savills
Troy Griffiths, Deputy Managing Director of Savills Vietnam

Foreign investors remain strongly interested in the Vietnamese property market. Property will remain a safe haven throughout the short term.

Overall Vietnamese property returns are generally higher than regional peers. Rental yields across most asset classes are reasonable and with capital gain factored in, total returns are competitively high. With ‘country risk’ rapidly diminishing then foreign capital is being lured to Vietnam.

Vietnam is well positioned to leapfrog traditional markets through financial technology platforms that could have great benefit to property markets. Without legacy systems and with a young, savvy and ambitious start up culture, the opportunities to embrace technologic advancement are strong. 

The government has a raft of initiatives, decrees and circulars to support this, however the competition from regional peers is immense. Of greater local interest is the strength of the Vietnamese domestic economy continuing to support demand for particularly residential product, that in turn fuels much of the broader economy. 

Good governance seems to continue promoting better and more effective business and foreign trade that will assist the commercial sectors. 

From 2013 to 2017, the apartment market in Ho Chi Minh City saw an average increase in apartment prices of around 9 per cent per annum. High urbanization rates and infrastructure development in Ho Chi Minh City strongly contributed to the overall improvement.

Government policies have also led to a steady supply of apartments and hence a relatively stable market without any significant oversupply.

The strong residential demand will likely continue throughout the rest of 2018, particularly at the more affordable end of the market from genuine owner occupier demand. Strong new supply will come online across all grades and capture the demand of all purchaser pools. 

Apartment prices in Ho Chi Minh City are generally still lower than regional peers such as Kuala Lumpur and Bangkok, despite much stronger growth rates in Ho Chi Minh City when compared with these markets.

In 2017, Ho Chi Minh City’s high-end apartment prices were around 90 per cent of that in Kuala Lumpur and around 20 per cent of Singapore.

The average price across the broader market is expected to continue to increase but at a slower pace, with price increases linked to better development standards and continued strong residential demand driven by urbanization, the rapid growth of the middle class, as well as new infrastructure.