Scouting are includes Hanoi, Ho Chi Minh City and as far away as Europe and the U.S.
The significant contribution from foreign investors has transformed and modernized Vietnam’s metropolis to attract Vietnamese buyers, whose personal wealth has increased in step with their nation’s financial growth. For examples, the number of luxurious tower of glass and steel in Ho Chi Minh City’s has been increasing rapidly in the past ten years. These are the symbols of the country’s economic advancement and growing property market.
According to Ms Dung Duong, senior director, national head of professional services at CBRE Vietnam, high-end real estate has spurred a wave of local and overseas interest and investment across Vietnam and particularly in Ho Chi Minh City.
Not just in Vietnam, the interest in high-end real estate is expanding beyond Vietnam’s borders as an increasing number of individuals find themselves with the means to invest internationally.
Due to the positive effects of joining the World Trade Organization, Vietnam economy has been growing significantly. Last year, Bloomberg reported that the Southeast Asian nation, once one of the poorest countries in the world, recorded 7.1% economic growth, making it one of the best performers globally. And the forecast remains positive.
Hot location and types of properties
Immigration is one in many reason for international property purchase, where buyers invest in citizenship via investment programs. One example is the United States’s EB-5 visa program, which allows immigrant investors to become permanent residents by investing at least US$900,000.
U.Sm Canada, Australia and the U.K are the most popular countries among ultra high-net-worth Vietnamese due to their education opportunities and investment potential, although the high threshold of investment makes those countries out of reach for all but the wealthiest buyers.
In recent years, the investment flow redirect to European countries, where it is easier to gain citizenship. These countries including Cyprus, Malta, Portugal, Hungary and some of the Eastern European countries. Properties bought in these countries will often become permanent residences or family members.
It’s likely that investors from Hanoi prefered properties in Europe than anywhere else while English speaking markets are more popular with Ho Chi Minh City residents. This supports Ms.Duong observation that only the most affluent can afford to invest in the US, UK, Australia and Canada. Because the EB-5 program places no restrictions on where investors can buy property, many are drawn to states with an existing Vietnamese community, such as California, New York and Washington, D.C.
In many types of Properties sought after by Vietnamese buyers, townhouses or villas are the most frequently invested in at all location outside of the U.S. Ms. Duong said: “ However, in the U.S, Vietnamese buyers will invest in under-construction projects, most of which are condominium developments.”
Investors prefer properties closer to home
Of course, Vietnam is still a popular destination for Vietnamese investors. nThe residential market in Vietnam has seen a very strong recovery over the last four years. It is estimated that 95% of the buyers in Vietnam are the local ones – a dominate number.
In 2015, investment law in Vietnam changed to attract foreign property investors. The move came as the rest of Southeast Asia was enjoying a property boom, and the Vietnamese market was quick to reap the benefits associated with increased interest from overseas buyers, too. However, there are regulations regarding the ways that buyers from overseas can invest, limiting them to a owning a maximum of 30% of the apartments in a condominium or 250 dwellings per ward.
District 1 of Ho Chi Minh City – the financial center of Vietnam, where Ho Chi Minh City Stock Exchange and the Vietnamese headquarters of international banks are located, ultra high-end properties like Vinhomes Golden River and The Marq is getting the most attention from investors.
Some very wealthy investors are looking for luxurious properties in District 1. However, most are looking for capital gain rather than rental yield, because the rental yield of this segment in this area is only probably 4% or 5%.
However, the most important reason for buying outside of District 1 is buy-to-let purpose, hoping to capitalize on growing expat demand. Most of big companies and incorporations have offices and branches in Ho Chi Minh City, making the leasing demand for expats increase significantly.
But despite profits being compressed recently due to supply outpacing demand, the average rental yield in Ho Chi Minh City outside of District 1 remains between 6& and 7% compared with 4% to 5% in Hanoi.
To lessen environmental pressures currently faced by the city, a plan called “ New Urban Area” is deployed on the east back of the Saigon River, opposite the existing Central Business District.
Even though the first metro line that connects District 1, District 2 and District 9 in Ho Chi Minh city will take another two or three years to be completed, buyers are still speculatively investing. And because there are a lot of available land in these area for developers, investors can still choose from a diverse portfolio of products in this area.
It doesn’t just stop at Ho Chi Minh City, local and foreign investors are also looking for other cities across the country. Last year, Hanoi overtook its southern counterpart as the main recipient of foreign direct investment in Vietnam.
At the meantime, investors are looking for detached houses, terraced houses and semi detached houses rather than condominiums. The land price has growth significantly in Hanoi, much faster than Ho Chi Minh City. For that reason, investing in Hanoi makes higher profits.
And real estate market growth is not limited to top tier cities. Da Nang, Nha Trang and Phu Quoc are three most popular tourist cities in Vietnam which benefiting from the nation’s fast-growing tourism industry. The strong demand not only comes from the international tourists but also from Vietnam’s growing middle class for whom a vacation property is now within reach.