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

Foreign retailers increase presence in Vietnam

Many foreign distributors are eagerly implementing their plans to expand their operations in the promising Vietnamese market at a time when the country is preparing to fully open its retail market in January 2009, pursuant to the WTO’s commitments.
In the first nine months of this year, the country’s total retail sales value reached 694 trillion VND, a year-on-year increase of 30 percent.One of Japan’s five largest electronics retailers, Best Denki, is preparing to establish a joint venture in Vietnam in November. The group has previously selected Ben Thanh Marketing Company, which owns the group’s Best Carings brand, as its partner for franchising. According to Best Denki’s Singapore-based Regional Marketing and Business Development Director C. J. Raj, the group has plans to open 10 more electronics supermarkets in several big cities in Vietnam, in addition to the current ones in Hanoi and the southern city of Can Tho. The move is aimed at winning 5 percent of Vietnam’s electronics market, which is worth a total of 3 billion USD annually, by 2012. Vietnam’s largest foreign distributor, Metro Cash & Carry, was granted permission to open its ninth outlet in Bien Hoa City in the southern province of Dong Nai in August. The group has announced plans to open a further 12 outlets in Vietnam. Since it began operations in Vietnam six years ago, Metro Cash & Carry has invested 120 million USD in eight wholesales centres across five cities and provinces. The Republic of Korea (RoK)-based supermarket group, Lotte, is preparing to open a trading centre in Ho Chi Minh City’s South Saigon area, while another RoK group, GS Retail, plans to build 10 shopping centres in southern Binh Duong province in the next two years. Meanwhile Thai Charoen Pokphand (CP) Group, which is famous for producing fresh and processed food, has moved quickly to open a chain of Fresh Mart outlets in Ho Chi Minh City. In this context, domestic firms are bracing themselves against stiff competition from better equipped foreign investors. With the aim of establishing a popular supermarket chain for consumers from all walks of life, last weekend the Saigon Trade Corporation opened one of 20 stores it plans to build in the country between now and 2010. Saigon Co.opmart of the Saigon Co.op has joined forces with the BMC Construction Materials and Construction Installation, which specialises in real estate, to open supermarkets in BMC’s trading centres. According to the Vietnam’s Retail Association, social retail sales for the 2003-2007 period increased by between 18-22 percent per year, far exceeding the 8-10 percent figure recorded in the previous period. In the first nine months of this year, the country’s total retail sales value reached 694 trillion VND, a year-on-year increase of 30 percent. Vietnam is home to 400 supermarkets, 60 trade centres and 2,000 convenience stores. The country expects to have 700-750 supermarkets, 150 trade centres and thousands more convenience stores by 2010.
(Source: VNA)

Malaysia tops list of foreign investors in Vietnam

Malaysia heads a list of 40 countries and territories who have invested in Vietnam over the last nine months, following the licensing of its 9.8 billion USD project to construct a steel complex in southern Ninh Thuan province.

Construction of the steel complex in Ca Na, which was licensed by the provincial People’s Committee on Sept. 19, is the biggest foreign investment project in Vietnam so far. It will be jointly executed by the Lion Corporation and the Vietnam Shipbuilding Industry Corporation (Vinashin).

Malaysian businesses are currently registered to invest in 37 projects worth a total of 14.8 billion USD in Vietnam , making up 4.1 percent of the total number of projects and 26.4 percent of registered capital, said the Foreign Investment Department under the Ministry of Planning and Investment.

The Malaysian Berjaya Land Bhd Corporation has invested 3.5 billion USD in a construction project to develop urban areas and universities in Ho Chi Minh City and another 930 million USD to build the Vietnam Financial Centre in the city’s District 10.

The corporation has also invested 230 million USD in projects being implemented in the centre of Bien Hoa city in southern Dong Nai province and 500 million USD in projects being carried out in Thach Ban new city in Hanoi .

The Malaysian ambassador to Vietnam Lim Kim Eng praised the investing environment in Vietnam in general and in Hanoi in particular and said it has attracted an increasing number of foreign investors, including Malaysian businesses.

Malaysian investors have plans to invest in real estate as well as in the construction of hospitals, hotels, banks and production factories, she added.

The Malaysian Industrial and Foreign Trade Minister Muhyiddin Mohd Yassin paid a visit to Vietnam at the end of last July, accompanied by representatives of large businesses seeking investment and business opportunities.

(Source: VNA)

Vietnam Dong Investors Use Black Market for Dollars

Vietnam's currency controls are forcing foreign investors into the black market to obtain dollars, aggravating declines in the world's worst-performing stock market and pushing benchmark bond yields above 20 percent.
Businesses that aren't controlled by the government pay about 7 percent more than the official rate when using the dong to buy dollars because the state gives its trading companies priority access to the U.S. currency, the World Bank said. The premium is reducing demand for the nation's stocks and bonds, according to PXP Vietnam Asset Management.
``There is clearly a shortage of dollars,'' said Kevin Snowball, a money manager at PXP Vietnam in Ho Chi Minh City, which oversees $117 million. ``If you have dollars and you want to buy dong, you will get the official rate, but if you have dong and you want to buy dollars it's a completely different story.''
Vietnam's financial markets are tumbling after the central bank raised interest rates three times this year to 14 percent to tame inflation that accelerated to a 16-year high of 26.8 percent in June. The economy expanded 6.5 percent in the first half, the slowest in at least seven years, while the trade deficit more than doubled to $14.8 billion.
Rally to Rout
Vietnam's benchmark stock index, which climbed 168 percent in the past two years as Prime Minister Nguyen Tan Dung encouraged state companies to raise cash and finance expansion, slumped 53 percent since December. Yields on five-year government bonds jumped to 20.53 percent on June 13, the highest since at least July 2006, from 8.71 percent on Jan. 3.
The dong has dropped 5 percent this year, its biggest decline since 1998, to 16,846.5 per dollar as of 4:40 p.m. in Hanoi. Traders are pricing in an 18 percent drop in the coming year to 20,500, according to offshore 12-month non-deliverable forwards. The contract was at 16,080 on Dec. 31. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars.
The official rate will fall 6.4 percent to 18,000 by the end of the year, according to Calyon, the investment banking arm of Credit Agricole SA. HSBC Holdings Plc, Europe's biggest bank by market value, predicts it will strengthen 4.4 percent to 16,140 by year-end.
`Currency Crisis'
Vietnam may suffer a ``currency crisis'' similar to the slump in the Thai baht that triggered the regional collapse in 1997, Morgan Stanley analysts said in a report May 28.
``The central bank is not providing dollars, except to some importers and some working capital for exporters,'' said Noritaka Akamatsu, a Hanoi-based economist for the World Bank. ``That's why there is some depreciation pressure.''
The State Bank of Vietnam allows the currency to trade 2 percent either side of its daily reference rate. Gold shops and street money changers offer a black market rate of about 18,000, said Akamatsu. Banks offer a similar rate by adding fees to sell dollars, he said. The rate was as high as 19,500, he said.
The dong slumped in the forwards market in May as foreign investors trapped in the bond market bet against the currency to hedge against losses, Akamatsu said.

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Vietnam attracts over $30 bln of foreign investment in first half

Vietnam attracted 31.6 billion U.S. dollars in foreign direct investment in the first half of the year, as against 20.3 billion dollars of the whole 2007, said a senior economic official here Saturday.
The figure proved that foreign investors remained confident in Vietnam although its economy was experiencing great difficulty, said Cao Viet Sinh, Deputy Minister of Planning and Investment
The country is likely to attain a gross domestic product (GDP) growth rate of between 6.6 and 6.7 percent in the first six months, said Sinh, adding that the rate helps ensure the targeted growth for the whole year of 7 percent set by the National Assembly.
Also in the six months, the country earned 29.7 billion dollars from exports, said the deputy minister.