Estate of Affairs

Navigating the pros and cons of investing in the real estate market

Hi Sven,

I’m a French citizen currently living in Ho Chi Minh City. I would like to invest in local assets. I’ve tried to open a stock trading account with a local brokerage but it seems like the stock market is extremely volatile, and asset prices do not often reflect company fundamentals. I’ve been looking at buying some physical real estate as there are many new projects popping up around the city. Do you have any insights into the local real estate market and are there any projects that you would recommend as an investment?

The local real estate market has been in a sort of “honeymoon” phase when it comes to foreign investors, as the state allowed foreigners to purchase property for the first time in July 2015. The fact that you see so many new projects showing up around the city obviously shows that local developers are expecting foreigners, and obviously locals, to pounce on their new supply of developments.

It is relatively easy to purchase property as a foreigner at the moment. All you would require is a valid passport and Vietnamese visa, which could be a tourist or business visa. You would be required to sign a purchase agreement and transfer funds, either the entire value of the property upfront, or through a payment schedule dictated by the developer. If you would like to purchase a unit in a development where the basement level has not yet been completed, you would have to sign an additional deposit contract. You might ask “why would I want to buy an apartment in a development where the foundation has not yet been completed?” The truth is that there is so much demand for units within new developments around the city that many will have sold 80 percent of the total units before the second floor is even finished, a problem which I will address further on.

There are many positive economic aspects that could drive more foreign and domestic investment into the local property market. Firstly, neighboring countries like Hong Kong and Singapore have been experiencing issues within their own property markets. Residential sales have decreased around 70 percent in Hong Kong since the beginning of 2015, and Singapore’s residential property price index has decreased by 14 points since the beginning of 2014. Secondly, gross yields received on properties in Vietnam (the amount of money you receive from letting your unit relative to the price you pay) are higher than most cities in Asia, except for Phnom Penh, at around 8 percent. Thirdly, there are a few monetary positives: the central bank has kept its benchmark interest rate the same since 2014, the Vietnamese dong maintains a stable currency peg to the US dollar, and inflation for 2016 is forecast at around 3 percent—which all means that there should be no shockwaves to the credit market in the near future, which is important as more and more investors buy property on credit (loans to home buyers increased 22 percent in 2015). Lastly, urbanization is increasing and demographic shifts are taking place. More and more properties are being bought by younger individuals and families, on credit, which will drive prices positively going forward.

There are many inventories available, from apartments, penthouses, retail spaces to villas and office spaces. Residential space is usually priced around USD2,300 per square meter. There are also many new units around the city known as “officetels,” which are essentially hybrids of office space and residential, designed for young entrepreneurs working for small companies. These are usually priced at USD3,700 per square meter.

One of the more trusted developers is Novaland. They have over 20 projects available around the city, comprising penthouses, apartments, officetels and retail spaces.

If you are looking for something more luxurious, look no further than the Sanctuary Residences near the Ho Tram Strip, a 1.5 hour drive from Ho Chi Minh City. These are beachfront villas located close to The Bluffs Ho Tram golf course.

There are, however, a number of pitfalls when it comes to participating in the local property market. It is often difficult to obtain accurate market data, as with any frontier market. Speculative activities by local investors could lead to dramatic property price increases in the near term, resulting in boom and bust cycles (see China). Also, it is often difficult for foreign investors to obtain mortgages from local banks unless they are married to a Vietnamese citizen.

I believe this is a relatively risky real estate market. However, if you have a long horizon ahead and have a portion of your capital held in safer, less volatile investments, why not take a punt?

BIOSven Roering is a Managing Partner at Tenzing Pacific Investment Management. He holds an Economics Degree from Rhodes University in South Africa, and is a candidate in the Chartered Financial Analyst (CFA) program, having successfully completed level 1 and is currently working towards the level 2 exam.

Share this story, choose your platform!

Share on facebook
Share on twitter
Share on pinterest
Share on tumblr
Share on google
Share on linkedin
Share on reddit
Share on vk
Share on email
About the author:

1 thought on “Estate of Affairs”

  1. Hello Sven, I would like to question you about a comment you made. You said that it was relatively easy for foreigners to buy property in Vietnam. This was as of 2016. However, even more than two years later, there are several concerns regarding whether or not foreigners will be issued with the “Pink Books.” Could you kindly elaborate on that.
    Thanks alot!


Leave a Comment

Strategy for Beginners In Online Casino

If you’re just getting started in the world of online betting, you’re probably unaware of how the top games get played. Also, you might not be aware of specific tactics that will help you enhance your odds at an online casino. Popular casino sites have vast options, making it difficult for a novice to know

Read More »

How To Get Free Bonus From Happyluke Casino

Bonuses are given as free prizes for players who can engage actively on the online casino platform. One of the online casinos that are known for giving out hefty bonuses is Happyluke Casino. This online casino site currently has 4 types of bonuses which will be discussed below. The First Deposit Bonuses Casinos are a

Read More »

Busting Myths about Cloud Computing

Cloud computing has been in existence since 1996, something that most individuals are not aware of. Cloud computing provides the required computing services from devices to processing and storage power. It is usually done on a pay-as-you-use basis and over the internet. Therefore, cloud computing offers accessible and direct access to IT services and computing

Read More »

Top 10 Benefits of Having a Telecom Distribution Box

The telecommunications equipment industry creates services and technologies that empower consumers to communicate. Major products include networking devices, such as switches and routers, cable modems, digital subscriber lines, landline and wireless infrastructure equipment, chipsets, and cellphones. Parts and cables need to be kept protected and tidy, yet still, need to be accessible. Telecommunications cables, electrical

Read More »

How to Watch a Movie Without an Internet Connection While Traveling?

It is indeed challenging to fathom life before the internet. Everything we do nowadays is done online through our portable devices. Be it grocery shopping, stock exchange rates, tracking flights, and of course, enjoying shows and movies. Nonetheless, we have all been in situations where we did not have access to the internet. For example,

Read More »

Modern trends in student housing development

Student housing is an important part of academic excellence that is constantly pressured to advance and accommodate students’ needs as they change with time. Consequently, students’ residential facilities are ever developing with trends that meet the expectations of a modern student for improved accommodations. Student housing operators ensure they are aware of the modern trends

Read More »