Property sector shows vital signs of life

The Ciputra International City is Hanoi’s largest property development

Two different scenarios are emerging in Vietnam’s largest cities, with Ho Chi Minh City showing remarkable growth and Hanoi struggling to land foreign-invested projects.
In the second city, several developers have won licences for housing developments, including Keppel Land of Singapore, which is planning two residential projects worth a total of over $160 million.
Another large property project has been awarded to Vietnam Land of Hong Kong, who has teamed up with Saigon Real Estate and Construction joint stock company to build a $156-million residential and office development in Binh Thanh district.
Daewon of Korea, currently building a $20.5 million housing project in a joint venture with Thu Duc Housing Investment Company, is also seeking another licence for a $29-million property in Ho Chi Minh City and a $80-million project in Danang.
Two other investors from South Korea and Hong Kong are also seeking permission to build housing projects in the city, one valued at $990 million and the other at $80 million, while still other investors are looking for opportunities in the Saigon South area.
The picture in Hanoi, however, is quite different. No new foreign-invested housing projects have won licences in recent years, aside from the $2.1-billion Ciputra International City currently under construction.
The Indonesian-backed Citra Westlake City Development aims to complete its 10,000 apartments, villas and commercial facilities within the next five years.
But developers like the American-backed Magnum, which hopes to get the go-ahead on a $1 billion urban complex in Hanoi, have been way-laid by problems in land acquisition.
Other projects in Hanoi, such as the $240-million Red River City and the $230-million North Bridge project, have sat idle since the 1997 Asian economic meltdown.
Few foreign developers have invested in the building of offices, serviced apartments and retail space, despite high rates of occupancy and high rent.
Experts say many are driven away by caution, difficulty in getting licences, high land prices and problems in land planning.
“It will take time for foreign investors to make decisions,” said Nguyen Van Dao, managing director of Vietnam Property, a real estate marketing and management company.
Dao said foreign developers wanted to ensure the recent recovery of the real estate market was sustainable and not just a bubble that would burst in the near future.
Marc Townsend, managing director of CB Richard Ellis Vietnam, forecast a positive outlook for housing developments in both Hanoi and Ho Chi Minh City, despite high prices.
Housing prices in Hanoi and Ho Chi Minh City have increased four- or five-fold, and prices of land in some areas are now among the highest in the world. These prices have been driven up by forecasts of acute housing shortages and strong demand.
Townsend also predicted a positive outlook for Ho Chi Minh City’s housing market saying that it was a large market where many people can afford to purchase an apartment at a price of $1,000 to $1,200 per sqm.
Both Dao and Townsend said they were confident more foreign developers would manage to enter Vietnam’s real estate market in future.
But investors have raised the question of the viability in building apartments sold for between $50,000 and $400,000 when the annual income per capita is $480.
Others, however, point out that quality housing accommodation in Vietnam is still in its early stages, and the economy’s steady growth of 7 per cent is creating an increasingly large group of nouveau-riche.
Housing prices, after reaching record highs over the last few years, have remained high, and stable, over the past few months.
Property analysts attribute this soaring demand to the remittance of hard currency by Viet Kieu and overseas workers, which amounts to nearly $3 billion a year.
With few other options for investment and a stock market still in its infancy, purchasing real estate is becoming a popular way to invest. And demand and prices have risen accordingly.
Vietnamese firms continue to lead the race in residential developments. In Hanoi there are around 70 projects in various stages of development while more than 20 projects will be launched in Ho Chi Minh City this quarter.