Vietnam revisited

For $270,000, one could roar out of a car showroom in a new BMW 4 Series Convertible or Audi S4 Avant in Singapore. For that same amount, one could own a two-bedroom apartment in a luxury condominium, on the banks of the Saigon River in Ho Chi Minh City (HCMC). From the take-up at the launch of The Nassim over the weekend of Jan 16 and 17, it is clear which option some Singaporeans chose.

A joint-venture (JV) project between listed giant developer Hongkong Land and its Vietnamese partner Sonkim Land, the 238-unit The Nassim is located in Thao Dien, an affluent landed housing enclave in prime District 2 in HCMC. The neighbourhood is sought after by expatriates owing to its proximity to international schools, the upcoming An Phu Metro Station on the Metro Line 1 and the CBD, a 10- to 15-minute drive away.

Units offered for sale at The Nassim last weekend were a mix of one- to three-bedroom apartments, with sizes ranging from 592 to 1,453 sq ft. All the four-bedroom units had already been sold prior to the roadshow in Singapore. The most popular units among Singaporeans were the two-bedders. The three-bedroom units, especially those on high floors with river views and priced in the range of $480,000 to $510,000, were equally popular, says Leong Boon Hoe, managing director of CBRE Realty Associates, the exclusive marketing agent for the project. One-bedroom units priced from $195,000 were also well-received.

Strong sales
The launch of The Nassim came on the back of robust sales last year of projects by established Singapore property developers Keppel Land and CapitaLand, which have had a presence in Vietnam for two decades.

Keppel Land kicked off with the launch of the second phase of Estella Heights in HCMC’s District 2. Over 50 units were snapped up by Singapore buyers over the weekend of Oct 24 and 25. “Singaporeans found the units to be extremely good value,” says Marc Townsend, CBRE Vietnam’s managing director. “They felt incredibly comfortable with a Singapore developer whom they didn’t have to ask about the finishing of the product.” CBRE was the marketing agent for Estella Heights.

CapitaLand held the maiden launch of The Vista and Vista Verde, two of its residential projects in District 2 in HCMC. About 100 units were sold over the weekend of Nov 7 and 8. As at end-December, 75% of the 1,152-unit Vista Verde had been sold and 90% of the 750-unit The Vista had been taken up. At The Vista, units were sold with a guaranteed rental yield of 6% per annum for two years, with units managed by The Ascott Ltd, Capita Land’s serviced residence arm. This is the first rental guarantee scheme in HCMC, says CapitaLand Vietnam CEO, Chen Lian Pang.

Having sold more than 1,300 units in Hanoi and HCMC, CapitaLand was ranked among the top-performing foreign developers in Vietnam in 2015, says Chen. It has built up a formidable portfolio of 7,850 homes across eight resi dential projects in HCMC and Hanoi. These include both existing and two new JV developments locked in last year.

Attraction for foreign investors
The spike in foreign interest in Vietnam real estate was predicated by the government’s relaxation of its foreign ownership policy, which took effect last July. By allowing foreign individuals to buy more than one residential unit and to lease them out was the game- changer for foreign investors, says Townsend. Prior to that, foreigners were limited to buying just one unit for their own use. Financing for purchases by foreigners is not available yet, so purchases still have to be made in cash.

All residential units sold to foreigners are on a 50-year lease, with effect from July 1, 2015. If it is resold to a foreigner, the lease automatic ally resets to a fresh 50-year lease. However, if a unit is resold to a Vietnamese national, it will revert to a freehold property. Foreigners married to Vietnamese nationals will be able to purchase residential property with freehold tenure.

Purchases by foreigners are capped at 30% of the total number of units in a single private condo project and a maximum of 250 houses in a landed housing ward, says Savills Vietnam. All residential property buyers are subject to a 10% value-added tax and 5% stamp duty. When it comes to selling the property, there is another 5% VAT and 2% capital gains tax.

Resort residences
While it may seem as though Singaporean investors are showing a preference for projects in HCMC, at least initially, those in Dalat, Danang, Phu Quoc Island and Hanoi will begin to feature in upcoming road shows, says CBRE’s Townsend. The weekend of Jan 30 and 31 will see a showcase of three properties by Vietnamese developer Sun Group. Two are located on the south of Phu Quoc Island and will be managed by AccorHotels upon completion in 2Q2017. They are Premier Village Phu Quoc Resort on a 73,000 sq m site at Ong Doi Edge, and Premier Residences Phu Quoc Emerald Bay, on a 41,980 sq m site at Khem Beach.

Of over 118 villas at Premier Village Phu Quoc Resort, 59 will be launched for sale with a 9% rental yield per annum over nine years. At Premier Residence Phu Quoc Emerald Bay, 200 out of a total of 486 condo units have been sold, and 257 will be released here. Premier Residences contains a mix of studios, one-bedroom units, duplexes and penthouses sized between 484 and 3,947 sq ft. Prices will range from US$150,000 ($215,800) to US$999,000.

The third property by Sun Group is the Inter Continental Sun Peninsula Residences in Danang, a luxury villa project managed by Inter Continental and designed by Bill Bensley. Three of the villas were sold last November at prices ranging from US$3.9 million for a two-bedroom villa to US$4.9 million for a three-bedroom villa. Another 17 villas priced from US$3 million will be made available in Singapore. “With more direct flights to second-tier cities such as Danang and Phu Quoc Island, as well as the government’s readiness to promote tourism, the next big market will be for great resort resi dences,” says Timo Schmidt, head of international residential sales at Savills Vietnam. Savills is the marketing agent for all three properties.

Hanoi
On Dec 12, a privately held Hanoi-based conglomerate called Tan Hoang Minh Group held the official opening of its new overseas subsidiary at Six Battery Road, Raffles Place with great fanfare, complete with a lion dance and guest appearance by a member of South Korean boy band BigBang. The Singapore-based Tan Hoang Minh International, the new subsidiary, will handle the overseas sales and marketing of its projects. Founded 30 years ago, Tan Hoang Minh Group is planning to be listed on the Singapore Exchange in the next two years, said group chairman Do Anh Dung in his speech at the ceremony.

Tan Hoang Minh intends to launch its highend condo project D’Le Roi Soleil in Singapore next month, sometime after the Lunar New Year. The 498-unit residential project is located in the exclusive neighbourhood of Dang Thai Mai on Quang An Peninsula, an enclave popular with expatriates, and in the vicinity of foreign embassies, serviced apartment projects such as Fraser Suites Hanoi and the upcoming Somerset West Point Hanoi, which will open in early 2017. About 75% of the residential units will have views of Hanoi’s West Lake, says Venus Wang, Tan Hoang Minh International’s head of sales.

D’Le Roi Soleil is a mixed-use development with two residential towers, office space and a shopping mall. Condo sizes range from two-bedroom units of 861 sq ft to four-bedroom penthouses of more than 3,550 sq ft. Unit prices start from US$330,000 to US$1.8 million or an average of US$4,000 psm. Launched in Hanoi in December, 120 units have been sold to date.

For the Singapore launch scheduled for end- February, Tan Hoang Minh is offering the first 20 buyers a five-year interest-free instalment payment plan. Those who pay cash upfront will receive an additional 6% discount on the price, on top of an $8,888 “early bird post-CNY discount”. The developer will also be offering buyers a 6% rental guarantee per annum for three years. The project will be marketed by PropNex International. “Unlike in HCMC where there’s a lot more new stock being launched, there’s very little supply of international quality projects in Hanoi,” says Anson Tay, PropNex International’s head of international market.

Property boom again
From a property market crash at end-2011, Vietnam is clearly riding another property boom. As at 4Q2015, foreign buyers focused their attention on HCMC, with the majority of transaction activity in District 2, a recognised expatriate enclave, says JLL Vietnam’s country head Stephen Wyatt. According to JLL, 7,617 residential units were launched in HCMC in that quarter, a 12% increase q-o-q and a 64% jump from a year ago. The proportion of highend apartments launched in 2015 was also the highest in three years at 32%. The take-up rate was equally strong, with 7,572 apartments sold in 4Q2015, an 18% jump q-o-q and 85% increase from a year ago. A good 92% of these units sold were under construction.

For the whole of 2015, HCMC saw 78 project launches with a total number of 41,907 units— a record in terms of new launches in a single year, according to CBRE in its report on Jan 7. In Hanoi, a total of 28,283 units were launched in the year, up 70% y-o-y. High-end apartments accounted for 28% of total new units launched, compared with 21% during the last peak of 2011, says CBRE. That year, US$9 billion foreign money was invested in Vietnam, of which 52% went into the property sector. However, 2011 was also when inflation and interest rates were in the double digits. A subsequent devaluation of the dong led to the credit crisis.

Four years on, 2015 was a banner year in terms of new home sales, with a record 36,160 units sold in HCMC, double the volume y-o-y, according to CBRE. Hanoi saw 21,102 units sold, up 90% y-o-y. “Taking advantage of the market’s strong sales momentum, developers across all segments [have] continuously increased their selling price, even weekly in some cases,” says CBRE’s Townsend. “New projects under construction observed sharper price increases than previously completed projects, empha sising that buyers prefer new products.”

In HCMC, high-end properties reported the largest surge in prices, at 8.3% y-o-y to an average of US$2,025 psm. In Hanoi, the overall launch price at new projects increased from 3% to 5% y-o-y. “After seven years of stagnancy, the market has finally gained full confidence to reintroduce premium high-end and luxury developments,” says CBRE’s Townsend.

Proximity to the upcoming metro stations have also had an impact on property prices. Projects located within a 10-minute walk to a metro station are likely to command a 10% to 20% price premium over those sited further away, according to CBRE Vietnam.

Diamond Island
Capitalising on the upswing in the property market is Kusto Group, a Kazakhstan-based international investment corporation focusing on oil, mining and real estate development. Its maiden project in HCMC is Diamond Island, which it plans to launch in Singapore in April. “It’s the first luxury project in HCMC with resort characteristics,” says Sergey Nam, Kusto’s deputy CEO of marketing and sales.

Diamond Island is not the group’s first property development project, although it is its first in Vietnam. Kusto has luxury property developments in Almaty, the largest city in Kazakhstan; Moscow, Russia; and Kiev, Ukraine.

When fully completed, Diamond Island will contain 888 apartments and 20 sky villas on a sprawling 80,000 sq m site. About 85% of the space is dedicated to landscaping and facilities. The property is located in Binh Trung Tay Street in District 2 of HCMC. The first phase of 150 units was launched in 2009 and completed in 2012. During the economic recession and debt crisis in Vietnam from 2011 to 2014, some developers had offered price discounts of 20% to 25% to offload their stock. However, Kusto suspended sales and marketing activity for Diamond Island during those years. “We didn’t want to destroy our brand,” says Nam.

Kusto took the opportunity to improve the facilities and infrastructure offered in Diamond Island during the three years when the market was soft. It recently tied up with Ascott to manage 55 units in the first phase as luxury serviced apartments. The units that are managed by Ascott will be sold fully furnished and will be priced upwards of US$250,000 and will come with a rental guarantee of 6% per annum for three years. Units in the first phase of Diamond Island range from 883 sq ft for a one-bedroom unit to 6,889 sq ft for a sky villa with swimming pool. The largest unit in the development — an 11,840 sq ft duplex with roof garden and a private lap pool — was sold for US$3 million.

Kusto is planning to launch some of the 950 units in the second phase of Diamond Island in Singapore as well. These will be smaller in size, with one-bedroom apartments starting from 592 sq ft, says Savills’ Schmidt, the marketing agent for the project.

“Buyers of units in the first phase of Diamond Island will be buying a completed product and enjoy immediate returns as they can put the units [under] the rental programme with Ascott,” says Schmidt. “During the residential market slowdown in 2011 and much of 2013, there were virtually no new developments being built. That means any project that started in 2014 will only be completed in 2017 or 2018.”

‘Another promising year’
2016 appears to be “another promising year” for the Vietnam residential market, with the government’s new stimulus package for mid-end purchasers, says CBRE’s Townsend.

“With overall pricing still attractive compared with other mature markets, more foreign buyers will look to Vietnam as more guiding laws are issued to foster investment activity,” he adds. “However, both homebuyers and developers need to prepare for a market with overwhelming supply at higher prices and evolving regulations, which might impact the absorption and purchasing patterns eventually.”

This article appeared in the City & Country of Issue 712 (Jan 25, 2016) of The Edge Singapore.

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