Vietnam Real Estate Scene A market in the
- Slides: 37
Vietnam Real Estate Scene : A market in the making Margaret Brooke, FRICS FHKIS CEO, Professional Property Services 10 April 2007
Renaissance of Economy Large population of 83 million One of the highest real GDP growth rates in Asia – 8. 4% in 2005 and 8. 2% in 2006 with HCMC at about 11% Low labour costs – two thirds of Mainland China 70% of population below 35 Highly motivated work ethic Strong entrepreneurial spirit P PS
Strong and Consistent Growth P PS GDP Growth China India Vietnam Singapore Hong Kong Malaysia Philippines Thailand 2005 10. 2 8. 4 6. 4 7. 3 5. 2 4. 8 4. 5 2006 8. 2 9. 2 8. 2 7. 9 6. 8 5. 9 5. 4 5. 0
Positive Fundamentals 2005 2006 8. 4% 8. 2% US$571. 3 US$725 Consumer price index 8. 3% 6. 6% Industrial production growth 25. 5% 6. 8% US$4. 1 bn US$7. 66 bn 11. 0% 10. 2% Exports US$32. 2 bn US$39. 6 bn Imports US$36. 8 bn US$44. 4 bn Foreign reserves US$7. 2 bn US$9. 0 bn External debt US$18. 0 bn US$20. 5 bn 34% 32. 8% 3. 46 mm 3. 58 mm GDP growth GDP per capita FDI as % of GDP External debt as % of GDP P PS Tourist Arrivals
Young, motivated workforce Labour costs are low … … education level high 2005 GNI per Capita Illiteracy Rate Percent, 2005 US$ United States 43, 740 Japan 38, 980 EU 31, 915 Singapore 27, 490 China 11% Malaysia 11% Vietnam 9% Malaysia 4, 960 Thailand 2, 750 Singapore 7% China 1, 740 Thailand 7% Vietnam P PS 620
Positive drivers Cultural factors are positive …. . Highly motivated labour force with strong work ethic More than 106, 000 SME’s registered since 2000 Culturally and socially quite “European” and open Many speak English Minimal ethnic or religious divisions Labour force more motivated than militant P PS
Ho Chi Minh City P PS
Hanoi P PS
Origins of Real Estate Market Pre – 1990 – Communist system – all land owned by the State – Virtually no real estate market as no laws regulating the use and private control of property – Housing distributed by State 1986 – “Doi Moi” and slow movement towards a more open and market economy P PS
First land property laws 1990 – 1998 – First land laws introduced concept of private “ownership” – Widespread speculation, land prices soared – Foreign developers flocked to Hanoi and HCMC - numerous commercial and luxury developments P PS
Development of Real Estate Market 1998 – 2004 – Revised Land Laws to prevent speculation – Asian financial crisis – many projects collapsed – Small local developers emerged – No new major projects – Little or no interest from foreign investors P PS
2004 Changes 2004 – Increasing incomes – emerging mortgage market – Shortage in all sectors – Still difficult for local developers to find finance New Land Law to attract increased foreign investment and enhance real estate funding options P PS
More Recent Improvements 2004 – Land use rights to be auctioned when State sells land – Improvements in mortgage lending up to 15 years and 70% – JV developers permitted to build apartments for sale – Adjustment of compulsory purchase compensation closer to market value P PS
New Enterprise and Investment Laws 1 July 2006 – New Common Investment Law (CIL) – Unified Enterprise Law (UEL) Introduction of common legal framework for all types of enterprise and provides equal treatment to all investors. However, real estate is to be regarded as “conditional investment. ” Still uncertain as to how new law will be impact market – foreign investment projects subject to registration procedures and evaluation by licensing authorities. P PS
Hanoi P PS
Land Tenure System (1) All land held by the State Distributed through land use rights Vietnamese citizens can have effective freehold ownership – no time limit on land use rights Foreigners restricted to 70 years by law (infrastructure projects) but only granted 50 years for other uses P PS
Land Tenure System (2) Foreigners allowed to lease land directly from Government or from Vietnamese companies for development Individuals only permitted to lease completed houses to foreigners Land use rights can be leased, mortgaged, exchanged, transferred or inherited Large development projects require approval of Prime Minister P PS
Drivers of future growth P PS
City Hall P PS
HCMC Along Waterfront P PS
Major Investment Opportunity Property market is evolving and forecast to experience continued capital growth Not only growing from a low base but also increasing demand as a result of – Strong growth in tourism – Rising urban population – Burgeoning middle class – Legal reform – Accession to WTO P PS
Residential Market (1) Large latent demand driven by …. . Rising incomes of burgeoning middle class: from 2000 -2004, HCMC GDP per capita increased 32% from US$1, 365 to US$1, 800 Development of banking sector and availability of mortgages Legal reform more favorable for real estate development Space of 10 sqm person compared to 15 sqm person in Shanghai P PS
Hanoi Residential P PS
Residential Market (2) Rapid urbanization – HCMC’s population is expected to increase from 7 mm in 2005 to 14 mm in 2020 Additional need for 60 m sqm of residential space of which half is for young families moving out of their parents’ homes, and the remainder for incoming city residents Current supply stands at 53 m sqm P PS
Diamond Plaza P PS
Office Market (1) Limited supply in both Ho Chi Minh City and Hanoi since 1998 Only recently have large projects (over 10, 000 sm) started construction Continuously rising rents reaching the same level as Shanghai High occupancy rates of 95% in both HCMC and Hanoi city centres P PS
Office Market (2) Some 540, 000 sm and 150, 000 sm of new office space estimated to be required in HCMC and Hanoi respectively by 2010 – Assuming growth in new businesses continues – Vietnamese companies upgrade to keep up with rising standards of professionalism – Arrival of foreign companies and expansion of existing ones P PS
Old Shop Houses P PS
Retail Market Nascent market with modern formats just starting to emerge Retail space will need to expand 5 times over next 5 years to match stock to population ratios in other Asian cities HCMC only has 2 department stores and 2 hypermarkets, 70 supermarkets, 50 convenience stores and no real shopping malls P PS
Omni Saigon Hotel P PS
Leisure and Hotels Vietnam billed as the next Thailand - 25% increase in visitor numbers since 2004 Over 3, 000 km of coastline suitable for resort and villa developments High 4/5* average hotel occupancy rates peaking to 90% during holiday periods Opportunities for international operators to improve returns P PS
HCMC Convention Centre P PS
Other Sectors Industrial Close to 100% occupancy of all HCMC industrial zones Extremely low supply of ready built factory premises for lease and international companies mostly have to build own facilities Townships Latent land value in townships yet to be conceived and developed in areas surrounding existing urban centres P PS
The Challenge Still a lack of experienced property market professionals Absence of local companies with suitable track record Few investors wish to take direct investment position Most investors prefer to put toe in water and to do so in joint venture with other funds – the herd mentality P PS
Scope for Hong Kong Involvement Bringing development expertise Sourcing/investing in development opportunities Packaging projects Raising funding Designing and project managing developments P PS
Scope for Hong Kong Involvement Selling and leasing finished projects Providing property and facilities management services Valuing property portfolios Providing asset management services to Vietnam funds P PS
Thank you Professional Property Services Limited
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