vietnam real estate scene : a market in the making
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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 - PowerPoint PPT PresentationTRANSCRIPT
Vietnam Real Estate Scene :Vietnam Real Estate Scene : A market in the making A market in the making
Margaret BrookeMargaret Brooke, , FRICS FHKISFRICS FHKIS
CEO, Professional Property Services CEO, Professional Property Services
10 April 200710 April 2007
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Renaissance of EconomyRenaissance of Economy
Large population of 83 millionLarge population of 83 millionOne of the highest real GDP growth rates One of the highest real GDP growth rates in Asia – 8.4% in 2005 and 8.2% in 2006 in Asia – 8.4% in 2005 and 8.2% in 2006 with HCMC at about 11%with HCMC at about 11%Low labour costs – two thirds of Mainland Low labour costs – two thirds of Mainland ChinaChina70% of population below 3570% of population below 35Highly motivated work ethicHighly motivated work ethicStrong entrepreneurial spiritStrong entrepreneurial spirit
Strong and Consistent GrowthStrong and Consistent Growth
GDP GrowthGDP Growth 20052005 20062006
ChinaChina 10.210.2 8.28.2
IndiaIndia 8.48.4 9.29.2
VietnamVietnam 8.48.4 8.28.2
SingaporeSingapore 6.46.4 7.97.9
Hong KongHong Kong 7.37.3 6.86.8
MalaysiaMalaysia 5.25.2 5.95.9
PhilippinesPhilippines 4.84.8 5.45.4
ThailandThailand 4.54.5 5.05.0
Positive FundamentalsPositive Fundamentals20052005 2006 2006
GDP growthGDP growth 8.4%8.4% 8.2%8.2%
GDP per capitaGDP per capita US$571.3US$571.3 US$725US$725
Consumer price indexConsumer price index 8.3%8.3% 6.6%6.6%
Industrial production growthIndustrial production growth 25.5%25.5% 6.8%6.8%
FDIFDI US$4.1bnUS$4.1bn US$7.66bnUS$7.66bn
FDI as % of GDPFDI as % of GDP 11.0%11.0% 10.2%10.2%
ExportsExports US$32.2bnUS$32.2bn US$39.6bnUS$39.6bn
ImportsImports US$36.8bnUS$36.8bn US$44.4bnUS$44.4bn
Foreign reservesForeign reserves US$7.2bnUS$7.2bn US$9.0bnUS$9.0bn
External debtExternal debt US$18.0bnUS$18.0bn US$20.5bnUS$20.5bn
External debt as % of GDPExternal debt as % of GDP 34%34% 32.8%32.8%
Tourist ArrivalsTourist Arrivals 3.46mm3.46mm 3.58mm3.58mm
Young, motivated workforceYoung, motivated workforce
United StatesUnited States 43,74043,740
JapanJapan 38,98038,980
EUEU 31,91531,915
SingaporeSingapore 27,49027,490
MalaysiaMalaysia 4,9604,960
ThailandThailand 2,7502,750
ChinaChina 1,7401,740
VietnamVietnam 620620
ChinaChina 11%11%
MalaysiaMalaysia 11%11%
VietnamVietnam 9%9%
SingaporeSingapore 7%7%
ThailandThailand 7%7%
Labour costs are low …
2005 GNI per Capita US$
… education level high
Illiteracy Rate Percent, 2005
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Positive driversPositive drivers
Cultural factors are positive …..Cultural factors are positive …..Highly motivated labour force with strong work Highly motivated labour force with strong work ethicethic
More than 106,000 SME’s registered since 2000More than 106,000 SME’s registered since 2000
Culturally and socially quite “European” and Culturally and socially quite “European” and openopen
Many speak EnglishMany speak English
Minimal ethnic or religious divisionsMinimal ethnic or religious divisions
Labour force more motivated than militantLabour force more motivated than militant
Ho Chi Minh CityHo Chi Minh City
HanoiHanoi
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Origins of Real Estate MarketOrigins of Real Estate Market
Pre – 1990Pre – 1990– Communist system – all land owned by the StateCommunist system – all land owned by the State– Virtually no real estate market as no laws Virtually no real estate market as no laws
regulating the use and private control of propertyregulating the use and private control of property– Housing distributed by StateHousing distributed by State
19861986– ““Doi Moi” and slow movement towards a more Doi Moi” and slow movement towards a more
open and market economyopen and market economy
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First land and property lawsFirst land and property laws
1990 – 19981990 – 1998
– First land laws introduced concept of First land laws introduced concept of private “ownership”private “ownership”
– Widespread speculation, land prices Widespread speculation, land prices soaredsoared
– Foreign developers flocked to Hanoi and Foreign developers flocked to Hanoi and
HCMC - numerous commercial and HCMC - numerous commercial and luxury developmentsluxury developments
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Development of Development of Real Estate MarketReal Estate Market
1998 – 20041998 – 2004
– Revised Land Laws to prevent speculationRevised Land Laws to prevent speculation
– Asian financial crisis – many projects Asian financial crisis – many projects collapsedcollapsed
– Small local developers emergedSmall local developers emerged
– No new major projectsNo new major projects
– Little or no interest from foreign investorsLittle or no interest from foreign investors
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2004 Changes2004 Changes
2004 2004 – Increasing incomes – emerging Increasing incomes – emerging
mortgage marketmortgage market– Shortage in all sectorsShortage in all sectors– Still difficult for local developers to find Still difficult for local developers to find
financefinanceNew Land Law to attract increased foreign New Land Law to attract increased foreign investment and enhance real estate investment and enhance real estate funding optionsfunding options
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More Recent ImprovementsMore Recent Improvements
2004 - 2004 - – Land use rights to be auctioned when State Land use rights to be auctioned when State
sells landsells land– Improvements in mortgage lending up to 15 Improvements in mortgage lending up to 15
years and 70%years and 70%– JV developers permitted to build apartments JV developers permitted to build apartments
for salefor sale– Adjustment of compulsory purchase Adjustment of compulsory purchase
compensation closer to market valuecompensation closer to market value
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New Enterprise andNew Enterprise andInvestment LawsInvestment Laws
1 July 2006 1 July 2006 – New Common Investment Law (CIL)New Common Investment Law (CIL)– Unified Enterprise Law (UEL)Unified Enterprise Law (UEL)
Introduction of common legal framework for all Introduction of common legal framework for all types of enterprise and provides equal treatment types of enterprise and provides equal treatment to all investors. However, real estate is to be to all investors. However, real estate is to be regarded as “conditional investment.”regarded as “conditional investment.”Still uncertain as to how new law will be impact Still uncertain as to how new law will be impact market – foreign investment projects subject to market – foreign investment projects subject to registration procedures and evaluation by registration procedures and evaluation by licensing authorities. licensing authorities.
HanoiHanoi
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Land Tenure System (1)Land Tenure System (1)
All land held by the StateAll land held by the State
Distributed through land use rightsDistributed through land use rights
Vietnamese citizens can have effective Vietnamese citizens can have effective freehold ownership – no time limit on land freehold ownership – no time limit on land use rightsuse rights
Foreigners restricted to 70 years by law Foreigners restricted to 70 years by law (infrastructure projects) but only granted (infrastructure projects) but only granted 50 years for other uses50 years for other uses
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Land Tenure System (2)Land Tenure System (2)
Foreigners allowed to lease land directly Foreigners allowed to lease land directly from Government or from Vietnamese from Government or from Vietnamese companies for development companies for development Individuals only permitted to lease Individuals only permitted to lease completed houses to foreignerscompleted houses to foreignersLand use rights can be leased, mortgaged, Land use rights can be leased, mortgaged, exchanged, transferred or inheritedexchanged, transferred or inheritedLarge development projects require Large development projects require approval of Prime Ministerapproval of Prime Minister
Drivers of future growthDrivers of future growth
City HallCity Hall
HCMC Along WaterfrontHCMC Along Waterfront
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Major Investment OpportunityMajor Investment Opportunity
Property market is evolving and forecast to Property market is evolving and forecast to experience continued capital growthexperience continued capital growthNot only growing from a low base but also Not only growing from a low base but also increasing demand as a result of increasing demand as a result of – Strong growth in tourism Strong growth in tourism – Rising urban populationRising urban population– Burgeoning middle classBurgeoning middle class– Legal reformLegal reform– Accession to WTOAccession to WTO
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Residential Market (1)Residential Market (1)
Large latent demand driven by …..Large latent demand driven by …..Rising incomes of burgeoning middle class: from Rising incomes of burgeoning middle class: from 2000-2004, HCMC GDP per capita increased 2000-2004, HCMC GDP per capita increased 32% from US$1,365 to US$1,80032% from US$1,365 to US$1,800Development of banking sector and availability Development of banking sector and availability of mortgagesof mortgagesLegal reform more favorable for real estate Legal reform more favorable for real estate developmentdevelopmentSpace of 10 sqm per person compared to 15 Space of 10 sqm per person compared to 15 sqm per person in Shanghaisqm per person in Shanghai
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Hanoi ResidentialHanoi Residential
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Residential Market (2)Residential Market (2)
Rapid urbanization – HCMC’s population Rapid urbanization – HCMC’s population is expected to increase from 7mm in 2005 is expected to increase from 7mm in 2005 to 14mm in 2020to 14mm in 2020
Additional need for 60m sqm of residential Additional need for 60m sqm of residential space of which half is for young families space of which half is for young families moving out of their parents’ homes, and moving out of their parents’ homes, and the remainder for incoming city residentsthe remainder for incoming city residents
Current supply stands at 53m sqmCurrent supply stands at 53m sqm
Diamond PlazaDiamond Plaza
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Office Market (1)Office Market (1)
Limited supply in both Ho Chi Minh City Limited supply in both Ho Chi Minh City and Hanoi since 1998and Hanoi since 1998
Only recently have large projects (over Only recently have large projects (over 10,000sm) started construction10,000sm) started construction
Continuously rising rents reaching the Continuously rising rents reaching the same level as Shanghaisame level as Shanghai
High occupancy rates of 95% in both High occupancy rates of 95% in both HCMC and Hanoi city centresHCMC and Hanoi city centres
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Office Market (2)Office Market (2)
Some 540,000sm and 150,000sm of new Some 540,000sm and 150,000sm of new office space estimated to be required in office space estimated to be required in HCMC and Hanoi respectively by 2010HCMC and Hanoi respectively by 2010– Assuming growth in new businesses Assuming growth in new businesses
continuescontinues– Vietnamese companies upgrade to keep up Vietnamese companies upgrade to keep up
with rising standards of professionalismwith rising standards of professionalism– Arrival of foreign companies and expansion of Arrival of foreign companies and expansion of
existing onesexisting ones
Old Shop HousesOld Shop Houses
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Retail MarketRetail Market
Nascent market with modern formats just Nascent market with modern formats just starting to emergestarting to emergeRetail space will need to expand 5 times Retail space will need to expand 5 times over next 5 years to match stock to over next 5 years to match stock to population ratios in other Asian citiespopulation ratios in other Asian citiesHCMC only has 2 department stores and 2 HCMC only has 2 department stores and 2 hypermarkets, 70 supermarkets, 50 hypermarkets, 70 supermarkets, 50 convenience stores and no real shopping convenience stores and no real shopping mallsmalls
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Omni Saigon HotelOmni Saigon Hotel
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Leisure and HotelsLeisure and Hotels
Vietnam billed as the next Thailand - 25% Vietnam billed as the next Thailand - 25% increase in visitor numbers since 2004increase in visitor numbers since 2004
Over 3,000km of coastline suitable for Over 3,000km of coastline suitable for resort and villa developmentsresort and villa developments
High 4/5* average hotel occupancy rates High 4/5* average hotel occupancy rates peaking to 90% during holiday periodspeaking to 90% during holiday periods
Opportunities for international operators to Opportunities for international operators to improve returnsimprove returns
HCMC Convention CentreHCMC Convention Centre
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Other SectorsOther Sectors
IndustrialIndustrialClose to 100% occupancy of all HCMC industrial Close to 100% occupancy of all HCMC industrial zoneszonesExtremely low supply of ready built factory Extremely low supply of ready built factory premises for lease and international companies premises for lease and international companies mostly have to build own facilitiesmostly have to build own facilities
TownshipsTownshipsLatent land value in townships yet to be Latent land value in townships yet to be conceived and developed in areas surrounding conceived and developed in areas surrounding existing urban centresexisting urban centres
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The ChallengeThe Challenge
Still a lack of experienced property market Still a lack of experienced property market professionals professionals Absence of local companies with suitable Absence of local companies with suitable track recordtrack recordFew investors wish to take direct Few investors wish to take direct investment positioninvestment positionMost investors prefer to put toe in water Most investors prefer to put toe in water and to do so in joint venture with other and to do so in joint venture with other funds – the herd mentality funds – the herd mentality
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Scope for Hong Kong Scope for Hong Kong InvolvementInvolvement
Bringing development expertiseBringing development expertise
Sourcing/investing in development Sourcing/investing in development opportunitiesopportunities
Packaging projectsPackaging projects
Raising fundingRaising funding
Designing and project managing Designing and project managing developmentsdevelopments
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Scope for Hong Kong Scope for Hong Kong InvolvementInvolvement
Selling and leasing finished projectsSelling and leasing finished projects
Providing property and facilities Providing property and facilities management servicesmanagement services
Valuing property portfoliosValuing property portfolios
Providing asset management services to Providing asset management services to Vietnam fundsVietnam funds
Thank youThank you
Professional Property Professional Property Services LimitedServices Limited
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