The Property Investment Market

Vietnam's largest city, Ho Chi Minh City (HCMC), has an area of 2,093 square kilometres and consists of 19 urban and five rural districts. The city has an estimated eight million residents and is growing rapidly.

In the last few years, Vietnam and in particular HCMC has witnessed an increasing growth of excess demand in the property market. Demand for all types of property has increased at a much faster rate than supply including:

• Rapid increase in rents and capital values across all sectors
• Office buildings at or near full occupancy
• Strong demand from both local companies and Multinational Companies entering the market or expanding
• Strong demand from international retailers, set to accelerate further as WTO commitments take effect
• Land prices rising to levels comparable to those in Asia's most expensive cities
• Demand significantly outpacing supply in all sectors

FDI in 2007 was US$ 20.3 billion, of which almost US$5 billion was invested  in the real estate market.

On January 9 2008, HCMC granted licences to giant real estate projects including the US$255 million Kumho Asiana Plaza and the US$200 million Platinum Plaza Multi-function Complex.

The Office Market

Amid sustained demand from both local and overseas companies, average rents for quality space have continued to increase. Grade A buildings have been fully occupied since late 2005 with Grade B buildings at 100% occupancy since last 2007.

Factors driving the demand for quality office space include strong economic growth, FDI growth, WTO access, new multi-national companies, expansion of existing multi-national companies and the upgrading of Vietnam companies.

Residential Market

The rapid rise in HCMC's residential market has been a major driver in the property sector. Prices will continue to increase as incomes rise, urbanisation continues and a functional mortgage market develops, with domestic and international banks and insurance companies compete to offer longer terms and lower rates. More than 81,000 foreigners now live and work in Vietnam, and the figure will soar in the years to come with new inflows of foreign investment, thus driving property prices higher.

Retail Market

One of the key factors driving enthusiasm about Vietnam's retail potential is the abundance of young and increasingly sophisticated consumers, with 70% of the population younger than 35, incomes rising and shopping patterns and preferences evolving rapidly, numerous international retailers have entered or are preparing to enter the market. Vietnam's WTO commitments include progressively opening the market to participation by foreign retailers, allowing foreign investors to have 100 per cent foreign-owned retail operations from 2009 A.T Kearney's 2007 Global Retail Development Index ranked Vietnam as the world's fourth most attractive retail market, placing Vietnam in the category of "peaking markets" which are "developing quickly and are ready for modern retail".

Hotel/Resort Market

Tourism continues to hold great potential in line with the increase in the number of foreign investors.  Vietnam has over 3,300 kilometres of tropical coastline and many recent investment projects have focused on the development of seaside resorts..

In 2007, Vietnam received over 24 million tourists of which more than four million were international travellers. It was ranked 6th in the world with the fastest rate of tourism and travel growth. This creates a favourable investment opportunity in the Hotel/Resort sector to accommodate the growing tourism and business travellers for both the domestic and international markets.

Industrial Market

Following Vietnam's WTO accession, the government made the decision to make the development of high technology industries a top priority, setting a 2010 target date for bringing the level of information technology  and telecommunications to the regional and international level.

Already, leading global IT company Intel Corporation has signed an agreement to invest US$1 billion in a production park in HCMC, making it Intel's largest chip assembly and testing plant, employing nearly 4,000 persons.

Vietnam is currently one of the top 20 software outsourcing markets in the world in revenue terms, with an annual average growth rate of 40%. With a growing and youthful IT workforce, low costs and high aspirations, Vietnam has become an appealing offshore location, having all the ingredients to become a leading market choice for Business Process Outsourcing.