With their home only a few-hour flight away, investors of luxury apartments from Hong Kong are now looking to the emerging city of Hanoi, where accommodation is cheaper than elsewhere in the region.
|An increasing number of investors from Hong Kong are entering Hanoi’s real estate market due to high prices at home, Photo: Dung Minh |
Van Dang, a guide who speaks fluent Cantonese and English, has already taken more than 10 groups of visitors from Hong Kong to Hanoi this year. The 35-year-old guide told VIR that the number of Cantonese seeking realty in Hanoi has been “higher than ever in several years.”
Speaking to VIR, Alan Kan, committee member of the Hong Kong Business Association Vietnam (HKBAV), stated that as the prices of Hong Kong properties have risen to unaffordable levels, many are turning to investing in cheaper cities, for example in Vietnam and Thailand.
In the Global Property Guide, Hong Kong’s property market has been rated the least affordable internationally, for the eighth year in a row. Average home prices were 19.4 times the gross annual median household income in 2017, compared to 18.1 times in 2016, 19 times in 2015, 17 times in 2014, and 12.6 times in 2013.
For houses over 160 square metres in Hong Kong’s popular district of Kowloon, costs could reach more than $46,000 per sq.m. Meanwhile, the same luxury residence in Hanoi’s city centre – a market where prices have risen by 50 per cent over the past decade – costs about $2,000 per sq.m. Hanoi’s prices are also much lower than those in Bangkok, where equivalent properties can cost up to $7,000-$9,000 per sq.m.
HKBAV’s Kan noted that “currently, Vietnam is the hottest country in the region.” He added that China’s Belt and Road Initiative will position Vietnam as one of the first countries to benefit due to its location and stable political environment, thus making it a hub for both land and sea transport and attracting further investment to the country.
In contrast to the low prices for luxury apartments, the latest predictions from the World Bank expected Hanoi to reach 7.3 per cent in GDP growth this year thanks to the expanding manufacturing industry. In the year’s first two months, Hanoi lured in $109 million in foreign direct investment (FDI), according to the Hanoi People’s Committee.
In addition, a series of major infrastructure improvements are also under way in the city, where six metro lines are on schedule for completion soon.
Alongside Cantonese investors, many South Koreans have also settled in Hanoi with the impressive industrial expansion of Samsung, which already employs 45,000 workers and brings a growing number of South Korean expatriates to the city.
As of the end of 2017, Hanoi attracted an accumulated $27.64 billion worth of FDI with rising investment from Japan, which ranked second in accumulated registered capital, below Singapore and above South Korea. The high influx of FDI from these countries is not only channelled through the capital city, but also through the neighbouring provinces of Vinh Phuc and Thai Nguyen, with the presence of Samsung.
The arrival of these companies is accompanied by high-income employees, who are in need of decent accommodations to rent. The gross rental yield was between 4.5 and 5 per cent in Bangkok and much lower in Singapore, Kuala Lumpur, and Hong Kong, according to data from Hong Kong-based Golden Emperor, which recently hosted a two-day realty seminar on Hanoi’s property.
Golden Emperor also emphasised that Hanoi was the most promising city for investment in 2018. At the event, they introduced the Zen Residence in Hanoi’s Hoang Mai district, developed by Gamuda Land Vietnam, a listed real-estate developer from Malaysia.
Vietnam’s property market experienced a steep crash in 2011 due to soaring inflation, rising interest rates, and lending curbs.
Between 2011 and the end of the first quarter of 2012, nationwide prices for luxury flats slumped by 40 per cent, while mid-range flat prices fell 30 per cent, according to the Global Property Guide, citing data from Colliers International.
Prices have been recovering since late 2015, following changes to the law which allowed foreigners and overseas Vietnamese to legally own, sell, and transfer properties.
As a member of ASEAN, Vietnam only opened up its property market to foreign investors in 2015, later than Thailand and Malaysia. Developers are allowed to sell 30 per cent of units in each building to foreigners. Encouraged by fast economic growth, supportive governmental policies, and low entry costs, accommodation prices in the country’s two largest cities, Ho Chi Minh City and Hanoi, have already seen a considerable climb in recent years.
According to Cantonese website squarefoot.com, Vietnam and Hong Kong enjoy good, long-standing economic relations and the ties have only grown stronger of late. The bilateral trade in goods reached $18 billion in 2017, making Vietnam the fourth-largest trading partner of Hong Kong among ASEAN countries.
The ASEAN-Hong Kong Free Trade Agreement will take effect on January 1, 2019, allowing the economies to enjoy a more free-flow trade in goods, services, and investment.
Golden Emperor believes that investors in the city can expect a safe and secure long-term investment environment with good potential for capital appreciation.