Suli Ren is a Bloomberg expert researching the Asian market. In this article, she commented that Chinese investors are attracted to the attractiveness of luxury residential real estate in Ho Chi Minh City. However, they should consider more carefully before "pouring" money.
Vietnam's real estate attracts foreign investors
Since Vietnam allowed foreigners to own real estate in July 2015, the luxury real estate market has also become unprecedentedly hot. 3 years ago, Dai Quang Minh Company inaugurated the first complex in the Thu Thiem area, with a price of about 2,000 USD - 2,800 USD/m2, this was originally a 657 ha grassland area stretching from the Saigon River to the central district. Metropole, a project built near the site, is expected to cost double, $4,500 to $6,500 per square meter.
Last year, luxury housing prices in Ho Chi Minh City skyrocketed to 17%, while the rest of the residential real estate sector has not changed, said Ms. Duong Thuy Dung, Research and Consulting Director of CBRE. According to CBRE's estimate, in 2018, only 23% of luxury apartments were sold to local residents, of which the largest proportion of visitors to mainland China was followed by Korean and Hong Kong customers.
For Chinese people, Ho Chi Minh City is an extremely attractive location. In early 2016, advertising and marketing documents had an "offering" that this city was the Shanghai of Vietnam and the Thu Thiem area as well as Phu Dong district - a commercial center built and developed from abandoned agricultural land. Not only that, Chinese investors also see many similarities between Vietnam and China a decade ago - a country with political stability, which can reach growth through exports and friendly relations with the US.
And for Chinese investors who are familiar with houses with "sky-high" prices, luxury apartments in Vietnam seem like a "bargain". Earlier this year, China Vanke, the third largest real estate developer in the continent, launched a riverside project in Shanghai's Dong beyond the Forbidden City with a price of more than $15,000/m2, double that of the Metropole project in Ho Chi Minh City.
Things to note
Ms. Suli Ren commented that there is a minus point for a luxury apartment: the nearby infrastructure is still unfinished. Keppel Land's Estella Heights project is a typical example. Advertised as having a favorable location for families, on the other side of the expressway is a bustling residential area with full infrastructure, international magnetic services to small cafes, this is an apartment area with a swimming pool on the rooftop and a children's playground. However, currently, an elevated pedestrian bridge for students to travel to the school has not been built.
In addition, the metro project has been delayed many times, expected to be inaugurated in 2020. Meanwhile, Shanghai's first metro trip was in 1995 and many other lines have been built so far.
With 61% of GDP, Vietnam's public debt is gradually increasing to the ceiling of 65%. This causes Vietnam to limit spending on infrastructure. Ms. Ren commented that even if Vietnam decides to raise the public debt ceiling, there will still be no "room" to increase spending on infrastructure. Global trade is going down, causing Vietnam's temporary account surplus to be only 2.7% of GDP. In contrast, China's surplus was more than 10% 10 years ago. At that time, Shanghai looked like a large construction site.
back in 2006, apartments in riverside locations in Phu Dong district were priced at about 1,800 USD/m2. According to this expert, Chinese investors have to spend more money on the 20-year-old infrastructure of Ho Chi Minh City. The luxury apartment market in Ho Chi Minh City has become too hot, because 80% of buyers last year said they bought it for investment purposes.
It can be seen that, despite the remaining weaknesses, the Vietnamese real estate market is still an attractive location for foreign investors, with a strong economic growth rate and an increasingly increasing middle class. Moreover, the young intellectual class has helped the urbanization process make strong strides, which is a premise to put Vietnam in the list of countries with the fastest GDP growth in the world.
