Reported to have the second biggest potential for capital growth after China in both the residential and commercial property market in Asia, Vietnamese properties last year was piping hot and the total capital injected into the real estate market reached £3.37 billion. Most of this cash came from foreign direct investment (FDI) and overseas remittance. More than eighty-five per cent of the FDI capital that entered Vietnam’s capital, Ho Chi Minh City, last year was pumped into real estate.
Thousands of local and foreign investors rushed to snap up apartments and prices in certain districts in Ho Chi Minh rose by more than 100 per cent, which was far more than industry experts had predicted. Brett Ashton, Managing Director of Savills Vietnam, said, “The real estate price saw a two-fold increase over the last 12 months and three times over the last 18 months.”
As the market was on such an upward curve, experts predicted that it would continue growing this year, by as much as 30 per cent. PricewaterhouseCoopers even went so far as to list Ho Chi Minh City as one of the top ten most promising Asian markets.
In another positive move, the Vietnamese National Assembly agreed to implement a five-year pilot scheme to allow foreign enterprises and individuals to purchase and own residential properties in Vietnam. The current law only allows foreign enterprises and individuals to invest in the construction or development of residential property for the purpose of sale or lease. Ownership of residential property is for development and subsequent sale or lease.
The new Resolution substantially changes this position. It gives foreign enterprises and individuals the right to own and enjoy property rights similar to those enjoyed by domestic property owners. The pilot scheme is expected to start on January 1st next year.
But then came the credit crunch and that old saying of ‘last in, first out’ started to apply to Vietnam’s new market. As it was relatively unchartered territory and had undergone such a massive boom, prices had further to fall and foreign investors lost confidence in a less established market.
Booms inevitably come hand in hand with increased inflation and new Government policies are needed to ensure this doesn’t stall the market for good.
One venture that is going ahead is the commercial project on the shores of the South China Sea, 80 miles from Ho Chi Minh City. MGM Mirage and Asian Coast Development Ltd are joining up to build a £2.79 billion MGM Grand Ho Tram – a mixed use development consisting of beaches, luxury hotels and holiday resorts. On completion in 2011, it will be the largest resort complex in Vietnam
