Luxury accommodation reaches peak price level

Ho Chi Minh City offers some of the most luxurious residencies for less than regional competitors, Photo: Le Toan

Two premium projects located in Ho Chi Minh City – the Saigon Spirit and Empire City – were last week put on the list of being permitted by Ho Chi Minh City Department of Construction to sell products to the market. The two developments currently have the highest price in the market.

The Saigon Spirit, a complex of commercial offices, services, residential apartments, and a hotel located opposite Ben Thanh Market was funded by Saigon Glory, a subsidiary of Bitexco Group, was permitted to sell from VND216 million ($9,400) per square metre.

However, an insider source said that the prices are based on capital mobilisation value only. The official rate would be higher at VND500 million ($21,700) per sq.m when the project is finished in 2023.

Another high-end project, Thu Thiem Observation Tower, is part of the Empire City project located at Thu Thiem New Urban Area in District 2. It was permitted to sell at a price of VND160 million ($7,000) per sq.m.

Empire City is funded with $1.2 billion from a joint venture between Tien Phuoc Real Estate JSC and Tran Thai Real Estate JSC, as well as two foreign investors (Corredance Pte., Ltd. of Singapore and Denver Power Ltd. of the British Virgin Islands) consisting of high-rise apartment buildings and a 88-storey tower – the highest building so far in Vietnam.

Before that, the Grand Manhattan invested by Novaland and Alpha City from Alpha Group were quoted from $8,000 to $10,000 per sq.m.

High potential

The luxury housing market in the country is projected to be active thanks to the rise of wealth across Asia as well as in Vietnam.

According to a Prime Future report released by Savills, the increasing number of super-rich people in Vietnam and other Asian countries has a positive impact on the development and consumption of luxury real estate in both Ho Chi Minh City and Hanoi.

There continues to be a market for luxury residential products as the Vietnamese affluent class grows and fuels demand, the report stated, while the number of high-net-worth individuals (HNWI) in Vietnam and their wealth has increased steadily since 2013 and is expected to continue an upward trend.

Meanwhile, the amended Law on Housing 2014 allowing foreign property ownership in Vietnam has been facilitating cross-border demand for prime property from regional countries.

Thanks to this policy, for the last five years many high-end projects have quickly sold their quotas of 30 per cent maximum to non-nationals. Foreign demand fuelled by the growth of HNWIs in Asian countries is expected to expand further.

Tran Khanh Quang, general director of Viet An Hoa Real Estate JSC, said that apart from attracting interest from international millionaires, the country’s luxury segment is also being tracked by wealthy Vietnamese individuals.

With the increase of the Vietnamese super-rich, the trend of moving into luxury apartments has hiking compared to previous periods thanks to the advantage of prime location, high amenities, and multi-layered security. Meanwhile, Asian super-rich entering the million-dollar housing market in Vietnam are targeting a large difference in the price of similar products compared to developed cities in the region.

According to Quang, currently the average selling price of luxury real estate in Ho Chi Minh City is still fairly low, from 25-30 per cent compared to other locations such as Singapore, Hong Kong, Bangkok, Tokyo, and Taipei.

“With limited housing, supply in the central business districts of Ho Chi Minh City and the demand for high-value accommodation growing, the market has very good potential,” Quang said.

Figures from Savills Vietnam show that luxury apartments in Vietnam are now sold from $7,000-10,000 per sq.m compared to $10,000-15,000 in Bangkok, $15,000-20,000 in Singapore, and $20,000-25,000 in Hong Kong.

Top quality

Talking about the classification of super luxury apartments in Ho Chi Minh City, Dr. Tran Nguyen Minh Hai, a real estate analyst at the Banking University, said that luxury apartment projects are currently classified by location and selling prices. However, those classifications, according to Hai, are not accurate. “A so-called luxury project must meet the strict factors of location, architectural design, light space, residential community, general facilities, number of elevators, and many more. If calculating by all of those qualifications, the number of projects that fully meet the standards of a luxury apartment in Ho Chi Minh City can only be a few,” he said.

Major clarifications for luxury properties, according to Hai, involve location, privacy, unique design, and green space.

Meanwhile, an expert from Indochina Capital, one of the leading developers in high-end property, said that benchmark projects include Holm Villas, the Cove Residences in Empire City, the Centennial Bason and the Vertex in Ho Chi Minh City, and Indochina Plaza in Hanoi.

“Real estate is an industry where players must look at the long-term impact the sector will have on the community and future generations. Completed projects will stay in place for many years – their design and planning must be considered through the lens of climate change, future urban planning, and as we have seen in 2020, future public health crises,” said the expert.

He further added that environmental responsibility and sustainability are concepts that should be a standard for all future premium developments. Key players in the industry should initiate the change while working with government organisations towards formal issuance of guiding principles to the market.

Michael Piro - COO, Indochina Capital According to Indochina Properties, our brokerage arm, there has been a slight slowdown in transactions in the luxury segment since the outbreak of the COVID-19 pandemic. Nonetheless, foreign buyers remain highly interested in high-end residential products, especially those from Taiwan, mainland China, and South Korea, with focus being placed on the major cities of Hanoi, Danang, and Ho Chi Minh City. Even with current global economic turmoil and the global public health crisis, Vietnam’s economy is still forecast to emerge with a positive growth rate. The high-end residential segment has been one of the best-performing real estate markets in Vietnam. Furthermore, we believe that with responsible and sustainable development, in conjunction with the adoption of international development standards, and a long-term vision for future real estate projects, the market will continue to grow and flourish in Vietnam in the coming time. Caleb Lau - General manager, Hongkong Land No doubt, the pandemic is affecting the current market sentiment. As a result, the sales volume in the first half of 2020 has been dampened as most luxury homebuyers are waiting while others are looking for a good bargain. Despite this, we are convinced that the fundamental demand for new luxury homes in city centres, especially District 1 of Ho Chi Minh City, remains resilient. Properties have always been viewed as a safe investment, and we believe that Vietnamese ones continue to be attractive for both local and foreign buyers. However, with suspension of commercial international flights, many potential foreign buyers have deferred purchase decisions. Upon resumption of international flights and market confidence, we are confident that they will continue to invest here, especially in luxury homes. In addition, due to the scarcity of vacant land ready for residential development in city centres, we foresee that new supply of luxury homes will be limited. Andy Han Suk Jung - CEO, SonKim Land I cannot speak for the luxury accommodation of the whole of Vietnam but looking at Ho Chi Minh City, the demand in the luxury and premium apartment segment still seems strong, and absorption rates are also very high. Compared with such a high demand, supply has just not been able to keep up with demand for the last 2-3 years. Especially under the COVID-19 situation, many people seem to believe that investing in properties is not only safe but producing strong returns. That the government is now also focusing on spending more on the infrastructure works to boost the economy, it is also an encouraging factor for people to turn their eyes towards investing in the property market. Despite the outbreak, prices of land and apartments have remained strong and some increased a lot, outperforming stock markets, bank interest, and other options. Many big developers with projects in suburban areas or neighbouring provinces also helped to increase the land prices of nearby areas.