VIETNAM REAL ESTATE MARKET WIDE OPEN FOR INVESTORS
Vietnam Investment Review, September 12, 2023 – The Vietnamese real estate market is beginning to see green shoots of recovery. Marc Townsend, senior advisor at Arcadia Consulting Vietnam, who has more than 25 years of experience in the local real estate market, spoke exclusively with VIR’s Bich Ngoc about his assessment of foreign investors’ sentiment towards the Vietnamese market.
Why has Arcadia Consulting decided to enter the Vietnamese market right now at such a challenging moment?
We established Arcadia Consulting Vietnam in June 2022 with a vision to bring additional markets, particularly Australia and Europe, to Vietnamese investors. We saw that they wanted to invest overseas, and we brought a few projects here with some early interest.
One of our initial strategies was helping Vietnamese families that may be interested in purchasing a property in London, Melbourne, or Sydney for their children’s education. However, following those conversations we went to speak to some Vietnamese developers, and realised that we could help by marketing their projects overseas. That’s what we’re doing, in the same way we do with Thai, Malaysian, Australian, and Japanese developers.
We’ve had to adapt to the market because of the current challenges, but many Singaporeans who purchased property in 2007 and 2008, and then again from 2015 to 2017, have a good feeling about the Vietnamese market. They have seen the economy, education, infrastructure, tourism, and the real estate market all developing, particularly the residential segment. There are now good prices and payment terms.
How do foreign developers and buyers currently view the real estate market?
For a couple of years, they have had a real problem with the pricing in the Vietnamese market, which had got ahead of itself in terms of affordability. This was problematic for local buyers, but the reality is that this new pricing has helped foreigners regain interest.
Actually, the nation’s real estate market is doing very well, and has attracted a range of highly qualified foreign developers such as CapitaLand, Mapletree, Keppel Land, and Sembcorp from Singapore, and Nomura, Mitsubishi, and Toshin from Japan, among others.
The foreign developers are well established in Vietnam, and capital has been flowing for more than 30 years. I tell new arrivals that it is high-time to enter the market, as today it is much better than it was two years ago. The door is more open than ever before.
Have you seen positive signals in the market over the last few months?
Vietnam is seeing healthy economic growth. GDP is forecast to rise by 6.3 per cent in 2023, which is the envy of the whole world. This is lower than the growth we saw in the late 1990s, but it is still impressive in the current climate. Even the listed property sector stocks are much more positive than they were six months ago.
Some developers see this as an opportunity to reach younger consumers, however, looking at the unsold inventory, the market should be careful to avoid cash flow problems.
Nowadays, developers realised that to sell products, they must listen, learn, set specific goals, and create products that are suitable for younger people. Vietnam is in a golden demographic period, as many young people are starting their journey and creating a home for their family. I see this as a very positive aspect of the market.
Another factor is that the rate of relocation to urban areas is increasing demand rapidly. Therefore, the opportunities for investors and developers are considerable, outweighing any concerns over pricing.
Home buyers today have the option to borrow from banks at an interest rate of 10.5 per cent, but they don’t have to because developers are giving them better options. If you are in Europe, you have no choice besides a bank loan. But in Vietnam, the situation is more flexible. Apartments are being subdivided around the world to meet the needs of young families, but in Vietnam, we have developers creating specific products to help get them into their first home.
What opportunities are there for the Vietnamese real estate market over the next 18 months?
There are some obstacles, like the licensing backlog, but all of them are surmountable. Interest rates around the world are rising, but they are falling in Vietnam. Although the number of new products for sale has decreased significantly, the demand has not followed the same trend at all.
I’m sure some couples have decided to build an asset-free life, but they’re in the minority, especially in Vietnam. So, to build a real estate portfolio, young buyers are realising they are the sustainable demand.
Over the longer term, the completion of some of the large-scale projects around the city, like the opening of the first and second metro lines, will stoke the next wave of demand.
