With the recent buzz of an all-Asian cast movie from Hollywood called Crazy Rich Asians, everyone is now paying close attention to the high-end living from crazy rich Asians in Asian cities such as Singapore, Hong Kong and even emerging market like Ho Chi Minh City.
With the recent buzz of an all-Asian cast movie from Hollywood called Crazy Rich Asians, everyone is now paying close attention to the high-end living from crazy rich Asians in Asian cities such as Singapore, Hong Kong and even emerging market like Ho Chi Minh City.
Singapore is a very good example of an eye-watering expensive city where the main character from Crazy Rich Asians, Nick Young, is from. Singapore being, arguably, a top 5 real estate market in the world known for its high end developments and, at the same time, high prices. A 10,300 square feet penthouse at Sculpture Ardmore can be priced at USD$43,8 million. Alternatively, a harbor view townhouse on the Peak is selling at US$48 million. These figures have drawn us to question if the valuation can be sustained or investors should reevaluate their investment strategy to invest in other markets such as Ho Chi Minh City. In my experience of promoting Vietnam properties in overseas market, Vietnam has become an attractive investment destination with its tremendous economic growth in the last 10 years. Therefore, the answer is yes for the fact that investors are reevaluating their investment strategy and/or considering investing into emerging markets like Ho Chi Minh City as they are simultaneously getting priced out of their home markets.
With robust economic growth in Vietnam for the past several years, foreigners, especially Hong Kong, Taiwan, and Mainland China are finally diving into the real estate market as evident by the lack of available foreign quota for well-located projects and pent-up demand from foreigners looking to buy. Since the law change allowing for foreign ownership, foreigners are buying into the Vietnam story, taking advantage of the relatively bargain pricing compared to the rest of Asia, and are rapidly deploying capital for investments into the region.
New home prices in Ho Chi Minh City’s CBD averages at about USD 5,500 – USD 6,500/sqm, which is 25% of the average value for comparable real estate in Taiwan, and a fraction of that in Hong Kong where prices are reaching all-time highs. Also, property owners in Taiwan are liable for additional taxes and fees, while buyers in Vietnam only need to pay 10% for VAT tax and a one-time 2% payment for maintenance fee. Therefore, demand for investment properties in Vietnam has increased significantly since 2015 when a housing law was opened to international investors due to the attractive pricing for investors when compared to what they can buy in their home market.
Is the property market too expensive for local Vietnamese to buy properties in Vietnam?
While Vietnam is still developing country, its HNWI (high net worth individual) are still increasing significantly over the last 10 years. Therefore, with the new supply of luxury high building properties being limited across the city, we expect pricing in general to remain strong and units to be quickly absorb for well-located projects.
The Wealth Report by the independent U.K. real estate consultancy Knight Frank show that the ultra-high net worth individuals (UHNWI) in Vietnam grew by 320% from 2000 to 2016, the highest increase rate in the world, following by India and China. This figure expected to keep increasing by 170% from 2016 to 2020, also to remain the fastest growth rate in the world for this period of time.
Within the luxury segmentation, there is tremendous upside and opportunity for long term investment and to have a potential for capital appreciation as Vietnam is poised to continue its growth. In other words, although there is still a long way to go for Vietnam property market to develop like Hong Kong and Singapore, Vietnam is well on the way to becoming Asia’s next tiger with strong economic growth, growing middle class, and still relatively affordable pricing.