Real estate finds momentum

                                                                     Photo: JLL Vietnam

Anthony Couse, Asia Pacific CEO at JLL, looks at the real estate sector in Vietnam and the course of the AEC.

by JLL Vietnam, Anthony Couse, Asia Pacific CEO at JLL

While some ASEAN member states, including Malaysia and Singapore, have faced the challenge of slowing growth, others have been riding an upswing. Vietnam, in particular, has been a strong performer, delivering GDP growth of around 6 per cent so far this year, with its real estate sector hitting its stride since 2015.

A number of recent government reforms, such as stronger financial requirements for property developers and the relaxation of rules on foreign investment, have served to make the country an increasingly attractive destination, particularly for investors from Singapore and Japan.

The flow of foreign capital into Vietnam is likely to hit a record $15 billion this year, as announced by Prime Minister Nguyen Xuan Phuc at a conference in Hanoi. Investment into real estate reached $983 million in the first ten months, with Ho Chi Minh City - the country’s commercial hub - a standout.

Look no further than the construction of the Thu Thiem New Urban Area, a 657 ha site east of the Saigon River designated to be the new central financial district. It is set to be home to more than 150,000 residents and 200,000 office workers. This new district is made up of a $2 billion eco-smart city, the 86-storey Empire City Tower, the Thu Thiem Financial Center, and the Dai Quang Minh eco-complex, which incorporates a 28 ha public square and riverside park.

The retail and hospitality sectors are also growing. In August Ho Chi Minh City welcomed Vietnam’s largest department store, Takashimaya, in the new 590,000 square foot Saigon Centre.

Elsewhere in the country, the Hoi An South Integrated Resort is currently being constructed, with its first phase to be completed in 2019, and Ha Long Bay got its first five-star property, Wyndham Legend Halong Bay, in June.

However, Vietnam, like many other countries in the region, is still grappling with several structural issues. Its State-owned enterprises are in need of reform while its banking sector would benefit from greater transparency and improved compliance.

Challenges ahead

A year into the AEC’s ambitious project of economic integration in Southeast Asia - a collective market of $2.6 trillion and 622 million people - ASEAN economies continue to grow at a healthy clip of around 5 per cent annually compared to global growth rate of 3.52 per cent per year. Against this backdrop of increased opportunity as well as ambiguity, what is the outlook for those of us in the real estate business?

ASEAN’s traditional challenges have been well documented, from the vastly differing stages of development of its member states to the diversity of its population along linguistic and cultural lines. Other issues make integration tricky, among them underdeveloped infrastructure in countries such as Laos, Cambodia and Myanmar, and a lack of political unity required to push through policies.

But despite the uncertainties, as the AEC enters its second year there’s much to look forward to. There is a palpable energy in Southeast Asia, something I’m experiencing first-hand having moved to Singapore this year and in quick succession visited the Philippines, Malaysia, Thailand and Vietnam.

Among the colleagues and clients I meet, there is a positive sense of burgeoning opportunities in the real estate sector as urbanization and infrastructure development gains pace. ASEAN leaders have much to ponder as they figure out how the trading bloc fits into the increasingly complicated world trade dynamic.