Vietnam’s Rapid Growth Fuels Ho Chi Minh Property Boom
On the banks of the Saigon River an enormous development is taking shape. In addition to more than 60 villas and about 3,000 apartments across 13 towers, the new project from developer VinHomes will include an international school, exclusive shops and restaurants, and a gleaming marina. In the promotional video, a gang of friends — mostly westerners — drink a champagne toast, drive a golf ball into the sunset and sail a yacht over calm blue water.
Golden River is one of a number of high-end new developments that have sprung up in downtown Ho Chi Minh City in recent years, many of which are appealing to international buyers — who, since 2015, can now buy up to 30 per cent of apartments in new condo buildings. Added to that, the country’s booming economy is fuelling rapid real estate growth and, agents say, developers have been working overtime to keep up with demand. According to CBRE about 35,000 new high-end apartments — those commanding more than $1,500 per sq metre — have come to market in HCMC in the past three years. It’s a dramatic increase on 2012-14, during which time fewer than 10,000 units were listed for sale.
At Golden River, five of the 13 towers have so far come to market, and 80 per cent of those units have sold. This isn’t the first time developers have courted foreign investment. When Vietnam joined the WTO at the beginning of 2007 direct and indirect investment flooded into the country. House prices rocketed. Then the financial crisis hit in 2008 and investors took flight, contributing to a five-year slump that saw the price of new apartments in HCMC fall 30 per cent and older stock in some regions lose even more value.
Today the demand is back, agents say, mostly from South Korea, Hong Kong and mainland China. Last year, the proportion of CBRE’s condo buyers in HCMC who were from overseas increased more than 10 percentage points on 2016, to 64 per cent. Savills reports an increase in overseas buyers too. “In some of the higher-end product, the foreigner allocation of 30 per cent has quickly filled,” says Troy Griffiths, deputy managing director at Savills Vietnam. Most agents estimate the number of foreigners buying in Vietnam has doubled since 2014.
Two factors are behind the increase. In 2015, the Vietnamese government introduced laws that made it easier for foreigners — and wealthy Vietnamese expats — to buy property. Meanwhile, ever-rising real estate prices in places such as Hong Kong, Thailand and Sydney are encouraging middle-class Asian buyers to look further afield for holiday homes or investment properties. Vietnam, with its historic cities and relatively undeveloped tracts of coast, has come into focus as a leisure destination.
One buyer is Chinese energy executive Alex Cus, who first visited HCMC in 2011 on business and was struck by the city’s sense of potential. “I stayed for about three months and left with a very positive impression,” he says. In 2015, Cus returned and found cheap real estate and an economy that he thought resembled Shanghai’s in the late 1990s. Since then, he has bought two apartments in Vietnam.
According to David Blackhall, managing director of VinaCapital, a Vietnamese-property fund listed on the London Stock Exchange, demand for urban residential property between $80,000 and $200,000 — built for the country’s burgeoning middle class — is particularly strong. “Vietnamese developers could build stock for the next 20 years and still sell it out at that range,” he says.