ECM Libra property analyst Bernard Ching says Vietnam’s property market, which used to be quite robust because of foreign demand, has eased up quite substantially.

“Since the global financial crisis, many foreigners have left the country and foreign demand has dried up. Although fundamentally there is still demand for property, it is not as strong as it used to be since the foreigners left,” he says.

Ching points out that the property market in Vietnam is more a “long-term play and is very much dependent on the entry cost.”

“Companies that have ventured there need to balance the expectations of their shareholders with the realities of the market,” he notes.

However, optimists believe the closure of all gold trading floors in the country by end-March will lead to a re-channelling of capital flows from gold exchanges to the stock and property markets.

“Several trillion dong could flow into stocks by the end of March. Investors will then park their money in real estate,” says a property consultant.

Another positive factor will be in public infrastructure investments such as the Thu Thiem bridge and the East-West highway in Ho Chi Minh City which will improve the accessibility of more districts.

SP Setia Bhd president and chief executive officer Tan Sri Liew Kee Sin believes that Vietnam offers some upsides for developers.

“Vietnam’s favourable demographics, with a population of 87 million people living mainly in the countryside, presents opportunities for development.

“Demand for property, including suburban and modern housing, has picked up quite strongly due to a rapidly expanding urban middle-class. Even second-home vacation dwellings are seeing good take-up and this shows the kind of appetite that still prevails in Vietnam,” he says.

Liew says the sentiment has improved as the Vietnamese are beginning to pull out of conservative asset classes like gold.

Limited launches by developers during the global crisis has also resulted in a more favourable supply-demand scenario.

Liew says Vietnam is also experiencing a sub-urbanisation trend with cities like Ho Chi Minh City getting over-populated and the infrastructure unable to accommodate the rapid population growth and associated demands as far as housing is concerned.

The country’s expanding private sector has contributed to greater competition and more efficient allocation of resources.

“Improvements in the operating environment by the country’s policymakers in recent years have brought a surge in foreign direct investments,” he adds.

Liew says the company’s success with EcoLakes has given it greater confidence and “we are definitely seeking out more deals in Vietnam.”

According to a recent report by CBRE Vietnam, real estate is making a big comeback as there is strong interest from investors.

“As their lifestyle changes, the Vietnamese are looking to purchase second homes away from the city. This has caused a higher demand to create better homes and more choices for the Vietnamese.

“The market is still relatively untapped with demand higher than supply. This segment of the ‘new money’ population that are seeking better quality products such as second homes and luxury homes is growing exponentially as the people’s purchasing power rises,” the report says.

Savills Vietnam, in its latest market update, says demand for housing is expected to remain high in the medium term.

A number of apartments in Ho Chi Minh City and Hanoi, and holiday homes in Danang worth US$1mil to US$5mil, have been bought by Vietnamese, it says.

The Star (.my) - February 20, 2010