New housing law triggers market stir

New housing law triggers market stir

Posted: 10 May 2015 09:50 PM PDT

VietNamNet Bridge – Real estate developers are anticipating the implementation of the Law on Housing which opens more rights for foreigners to own property in Vietnam this July. Deputy managing director of Savills Vietnam Troy Griffiths has a look at the proposals.

Real estate developers are actively preparing to sell housing to foreigners from this July when the revised law on housing comes into force. Developers are obviously ready now as the products will initially be the same as offered to domestic buyers. Depending on the level of interest from foreigners, there may be changes to cater for offshore investors. An example of this may be to offer terms that suit investors more than occupiers, such as guaranteed returns.

Foreign developers, however, already have their sales channels in place and can move to the market quickly. Local developers will need to have a good sales strategy and either align with good marketers or go direct themselves to these foreign markets. This is all contingent on the amendments allowing foreign investment as contemplated.

While welcoming the decree on increased foreign ownership rights, Troy Griffiths argues the devil is in the details

In conjunction with our regional offices, Savills is already planning to host several events. One of the key issues now is having sufficient quality stock to provide investors with a good choice.

Regarding the type of products which would be most attractive to foreigners, I think it will be the broader-based investment product.

Many of our neighbouring countries have record low deposit rates, so if Vietnam offers a product that has reasonable yields then this will be very attractive.

There will be variations around this theme as some areas will also provide capital growth, thereby enhancing total returns in Vietnam. Other regional markets have had restrictions in policy as well as soft economic conditions weakening their residential markets. This together with low performance by cash and other asset classes should see a flight to Vietnamese property with good total returns.

The key markets will be those that have mature trading as well as access to the larger populations with investment potential. We see these markets as primarily Singapore and Hong Kong. Recently there have been very successful project sales in Cambodia and Myanmar that have marketed investment products. Generally these are smaller more affordable apartments with some sort of guaranteed return. Historically, developers have aimed for the end-user market, catering to the ultimate occupants. However, for investors they will care more about the potential to rent and receive a yield. This may change the focus to better locations, higher density districts and those with emerging capital growth potential.

Recently, we have seen some agencies from abroad coming to Vietnam to introduce their products. I think this could be a good option. Provided Vietnam’s amended laws support purchasers’ rights, then this will certainly work. It has worked extremely well in other locations. This is why the flight of investment capital has continued from Asia into Australia and the UK. Fundamentally it’s the transparency and enforceability of title and rights that purchasers are seeking.

For example, in 2014 a single residential agent in our Savills Taiwan office brought over 80 residential investment sales into Australia.

However, this is a competitive market with purchasers having a number of good choices available within the region, so the product will need to be priced and delivered against this backdrop.

On the attractiveness of the revised law for foreigners to buy houses in Vietnam, let us see how the decrees and circulars guide the amendments. It would be premature to comment prior to these being circulated. We are very happy that the government continues to provide policies that assist property development.

If the guiding decrees effectively limit the foreigner purchasers to those that are working in Vietnam then the impact would be very limited.

However if the amendment permitted ‘golden visas’ or investment then there would be strong demand. The next step to be contemplated is the ‘exit’. If there is potential for foreign investment then competing countries would also offer depreciation allowances to be offset against income for tax. There would also need to be a solid capital gains taxation regime and a clear pathway for repatriation of dividends.

In the coming time, if we look to mature markets with relaxed foreign ownership then usually no greater than 5 per cent annually of all transactions are to foreigners.

I expect the government to offer a support policy to assist the residential sector; however there will be strong parallel guidance through visas, tax and dividend remittances etc.

Amongst our regional peers, the Malaysia My Second Home programme is hugely successful and has been running for over 15 years, however there has not been a massive influx of any single foreign nation, nor have there been adverse effects. To the contrary, the scheme has worked very well, actively attracting foreign capital to Malaysia.

VIR

Vietnam wins award in global architecture competition

The Global Holcim Awards for Sustainable Construction presented the silver award, worth US$200,000, to architects of a low-impact green field university campus July 3.

The architecture university, in the suburb Can Tho City, was designed by Japanese architects Kazuhiro Kojima and Daisuke Sanuki and a Vietnamese architect Vo Trong Nghia.

The design attains harmony among the surrounding area and saving energy through using power from wind, sunlight and water.

It also makes use of locally grown materials, like bamboo and mangrove trees.

The gold award, worth $300,000, was awarded to a “river remediation and urban development scheme” in Fez City, Morocco, to the Moroccan architect Aziza Chaouni.

The Holcim Awards is an international competition of the Holcim Foundation for Sustainable Construction. The competition celebrates innovative, forward thinking and sustainable construction projects, and visions from around the globe and awards prize money of $2 million every three years.

VNN/SGGP

Investors rush to cash in on building boom

Developers both foreign and domestic are rushing to build new resorts throughout Vietnam. Luxury hotels are rising above the sands, and villas carry price tags of several million US dollars.


Tourism authorities are expecting a sharp rise in the number of newly-built resorts in the country. The Hai Phong port city’s Cat Ba Island is planning to build a number of high-end resorts.

The development of tourism in Vietnam has created a boom in newly built resorts across the country. Many tourism projects worth several hundred million dollars are being implemented in Vietnam. Around 50 resort projects are waiting for licenses while 20 others are about to be built or expanded, according to statistics released the by Viet Nam National Administration of Tourism (VNAT).

Vietnam is bestowed with many advantages such as beautiful beaches along 3,260 km of its coastline and many cultural heritage and wildlife sites throughout the country. And while political uncertainty elsewhere in the region has been worrying potential visitors, Vietnam has emerged as a safe and friendly destination in the eyes of foreign tourists.

Over 200 resorts currently operate in Vietnam, mostly based in Mui Ne - Phan Thiet of Binh Thuan Province, where there are approximately 100 resorts. The remainder are distributed across Ha Long, Cat Ba, Thanh Hoa, Ha Tay in the North and Da Nang, Hoi An, Thua Thien Hue, and Quy Nhon in the Central region.

According to the real estate advisory and management Company CB Richard Ellis (CBRE) Vietnam, budget flights offered by airlines such as AirAsia, Jetstar, Tiger Airways and Hong Kong Air are bringing an increasing number of tourists to Vietnam. Moreover, visitors who travel to Vietnam for Meetings, Incentives, Conventions and Exhibitions (MICE) purposes account for 20 per cent of the 3.6 million annual international visitors to Vietnam. This kind of tourism demands high quality complexes including entertainment and convention centres and resorts.

Jeff Tisdall, vice chairman of Kingdom Hotel Investment Group, the investor of Raffles Danang Resort project, said that Vietnam’s tourism market offered huge opportunities for investors because of lower investment costs compared to other countries. In addition, Vietnam is fully eligible for construction of luxury hotels and resorts.

Hurdles such as the acquisition of sites for resort construction and licence-granting procedures have discouraged some from investing. At the same time, however, many international real estate firms are now partnering with domestic firms, marrying capital and know-how to property and human resources, in order to successfully realise new building projects.

While the number of resorts in operation is growing at a fast clip, most projects remain small-scale. There are exceptions, though, such as the Furama Da Nang, Padanus Mui Ne, Sai Gon - Phu Quoc, Kien Giang and Vinpearl Nha Trang, among others.

Vu Quoc Thai, research director of Research and Advisory Real Estate Company VietRees, said that resort owners were now beginning to offer units as time-shares. Owners can reserve their villa for a holiday whenever they like, turning a profit for the rest of the year by renting their unit out to other vacationers.

The price range for a villa falls between VND4 - 50 billion ($250,000 - 3.125 million) depending on the location and scale of the project, as well as the investor’s brand name and prestige.

More projects will be launched in Vung Tau, Binh Thuan, Da Lat and Dong Nai provinces in the time to come, according to VietRees’ studies.

Vietnam now has 30 five-star resorts nation-wide.

Property developers find it tough during correction

Property developers are facing high inflation, tightening monetary policy and decreasing housing prices. Vu Quang Hoi, president of Bitexco, talked about the market and the strategies needed to survive. The economy is slowing down, labour and building material prices are increasing and property loans are being tightened. How will developers cope with these problems?

Vu Quang Hoi, president of BitexcoAll developers are now facing difficulties because of high building material prices and interest rates on bank loans. Total costs in many projects have increased 20-30 per cent compared to initial estimations. This is putting not only developers but also construction contractors in a plight. Those projects, which are still under construction but have sold out products, will have low profits. Some will even incur losses since they continue building as committed with their customers. This is a common situation and we have to accept. Businesses have to recalculate their investment portfolios and phase them in.How has Bitexco dealt with contractors at the time of skyrocketing prices?We sit down together to work out solutions acceptable to all so that construction of our projects will not be interrupted. It is in our expectation if the costs are 5 per cent higher our initial estimations. If the prices have increased more than 5 per cent compared to initial estimations, we the developers have to shoulder the burdens with construction contractors. If the prices have increased too much, contractors will face losses and they will stop working and as a result, construction will be halted. Therefore, both developers and contractors have to share the increased costs caused by higher prices of building materials, labour and interest rates. The construction of our residential, office, hotel and shopping mall projects such as Financial Tower, The Manor in Ho Chi Minh City and the Garden in Hanoi will finish on schedule. Is this the time the market will squeeze out dodgy developers and investors?I think real estate is one of the most difficult businesses. To be successful, developers must combine a lot of elements such as vision, prestige, location, economic growth, environment, technology and professionalism. Even when the market is growing well, it is still difficult for professional developers to sell products at high prices as the buyers are very discerning and they look very carefully before spending a huge amount of money on a property. Over the last few years, there are new real estate projects planned for areas far from cities’ centre. And those projects still have buyers. However, let’s look at those projects now. Are they under construction? If yes, have they attracted buyers to live there? There exist projects that do not have residents, they actually have no real value and they are probably a result of speculation. Many speculators who want to make quick buck can no longer exist now from these projects. In the current situation, a lot of projects are in danger of collapse. The market will correct itself and only those projects with good values and accepted by customers can survive. How will speculators and dodgy developers suffer from this market situation?It is not so easy to earn profits in real estate development. To build high-quality projects like The Manor we have had to pay high and accept lower profits because we spend a lot to create good products. Huge profits will only come from those projects selling products, which are still on paper. The developers can not survive if they do not have long-term vision, good business strategy and high-quality products. The real estate market’s transparency is still low and many developers can earn quick buck by selling their projects on paper. When the market is more transparent, this business can not survive. We will wait and see. As I have said, there are many investors and developers making quick buck in recent times and they have created the chaos in the real estate market. As a result, it is difficult to assess the real property values as well as real housing demand. Property prices have skyrocketed beyond their actual values and those in need can not buy. Yet, speculators will suffer when the market is down and this is true when land and housing prices are now decreasing. Some say it is now time for foreign developers. What’s your idea?It is obvious foreign investors come to build. However, foreign developers will meet more difficulties than us as we are Vietnamese and we are doing business in our own land. Although foreign developers may have financial strength and experience, it is not easy for them to know the real demand of the market, which is not always like what is reported in the media.